Trading Signals Short TermVIX/SPX Correlation

VIX/SPX Correlation

Analyze volatility and market correlation for timing signals

Current (20D)

0.0%

Average

0.0%

Trend

neutral

Strength

weak

Daily

VIX/SPX Correlation Analysis - Multi-Panel Chart

S&P 500 index candlesticks, VIX candlesticks, and 20-day rolling correlation between VIX and S&P 500 close prices

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Understanding VIX/SPX Correlation

Why VIX and SPX Usually Move in Opposite Directions

SPX (S&P 500) represents stock prices. When it rises, investors feel confident and less fearful.

VIX (Volatility Index) measures expected near-term volatility derived from S&P 500 option prices. It's often called the "fear gauge."

When stocks fall sharply, demand for protective puts rises, option premiums increase, and VIX spikes. Conversely, when stocks rise steadily, demand for protection falls, option prices soften, and VIX declines.

This natural "risk-on / risk-off" dynamic is why VIX typically moves inversely to SPX.

Why Positive Correlation Matters

Unusual Alignment:Occasionally, both SPX and VIX rise together. This is abnormal because it signals investors are buying stocks and simultaneously hedging with options.

Historical Pattern:Each time correlation between VIX and SPX rises above zero, the market has experienced short-term pullbacks afterward—even if brief.

Current Situation:Recently, U.S. equities have been making all-time highs while the VIX has also climbed. This divergence suggests growing unease beneath bullish price action.

Seasonal Context:The second half of September is historically weak for equities. Adding a rising VIX on top of that strengthens the case for caution.

Implication:When the correlation turns positive, it's not a long-term bearish signal, but it does raise the probability of a short-lived correction lasting a few days to a week.

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Bottom Line:

The VIX-SPX correlation rising above zero is a red flag worth monitoring. It reflects hidden stress in sentiment: investors are celebrating new highs while simultaneously bracing for trouble. History suggests such setups often precede quick market pullbacks, so traders should take the signal seriously even if the broader uptrend remains intact.