VIX Death Cross Historically Bullish for S&P 500 over Next 2 Weeks

On Friday December 9, a Death Cross appeared on a chart of CBOE Volatility Index (VIX). A Death Cross occurs when the 50 day moving average crosses below the 200-day moving average. When this happens to an individual stock or major index like S&P 500 it is normally considered bearish. But since the VIX is designed to measure near-term market volatility the lower it goes the better the S&P 500 usually performs. Thus, a VIX Death Cross can be a bullish indication.

Going back to 1990, including the most recent cross, there have been 36 VIX Death Crosses. The S&P 500’s average performance 30 trading days before and 60 trading days after the past 35 VIX Death Crosses have been plotted in the following chart. In the 30 trading days prior to the VIX Death Cross, S&P 500 rose an average of 4.1%. This solid advance is what played a large role in the VIX Death Cross as a rising market is normally accompanied by falling volatility and a declining VIX. After the Death Cross, S&P 500 continued to climb another 2.5% over the next 60 trading days.

Also included on the chart are the 35 VIX Golden Crosses. A Golden Cross is just the opposite of a Death Cross, the 50-day moving average crosses above the 200-day moving average as VIX is rising. A VIX Golden Cross is not a good event for S&P 500 as it has typically declined an average 2.4% before the VIX Golden Cross and failed to return to breakeven 60 trading days later.

In following tables, we present the S&P 500 performance after past VIX Death Crosses and VIX Golden Crosses across various timeframes. Based upon average performance the near-term, 1-and 2-week S&P 500 performance following a VIX Death Cross is better than a VIX Golden Cross, but by 1-month later and beyond the results are less clear. This would suggest that the current VIX Death Cross is likely bullish in the near-term, but not a great indication much beyond 2-weeks.

Click here for VIX Death Cross Table…

Click here for VIX Golden Cross Table…