Is VIX Approaching a Death Cross?

began my week updating charts and tables as I am heading to Tampa, FL to speak on options and then I’m off to Trader’s Expo in New York to deliver a couple of presentations.  The chart below, depicting the rolling 1 year and 5 year average closing prices for VIX is a favorite of mine.  I consider it a good depiction of the equity market shifting from a low to high volatility regime as the 1 year average approaches the 5 year average.  However, I noticed today that the 1 year average is very close to moving above the 5 year average and the last time this happened was in November 2007.  We all know how the markets acted in 2008 so I did some digging on the numbers.

VIX Death Cross


The specific day that the 1 year average last moved above the 5 year average was November 16, 2007 and the S&P 500 closed at 1458.74.  I took a look at where the S&P 500 closed 3, 6, 9, and 12 months after November 16, 2007.  Those numbers appear in the table below.

Death Cross Performance


Note that the S&P 500 was lower over all four of these arbitrary time frames after the 1 year average moved above the 5 year average.  In the stock world I have heard when the 50 day moving average close for the S&P 500 moves below the 200 day moving average it is referred to as a ‘death cross’.  If the VIX 1 year average moves above the 5 year and we experience the same sort of market that we did in 2008 I want it to be on record that I coined the term “VIX Death Cross”.

The posts on this blog are opinions, not advice.
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