VIX (volatility index) has fallen back to where it last was in January 2018, before the stock market’s recent “small correction” began. VIX is now below 11 for the first time in more than 6 months. This means that the stock market’s volatility has subsided.

Here’s what happens next to VIX when VIX falls below 11 for the first time in 6 months.

As you can see, VIX tends to go back up after it becomes this low. That’s because VIX is lower-bound and rarely goes below 10. VIX’s downside risk is low.

Here’s what happens next to the S&P 500 when VIX falls below 11 for the first time in 6 months. (i.e. volatility subsides for the first time in a long time).

Click here to download the data in Excel

As you can see, when volatility completely subsides for the first time in a long time (i.e. right now), the stock market usually tends to go higher even though VIX goes higher as well.

Here are the historical cases in detail

January 25, 2017

June 6, 2014

October 13, 2006 and July 12, 2005

February 3, 1995

April 15, 1993

Conclusion

When VIX is as low as it is right now, the stock market usually continues to go up. This is because VIX is not this low before bear markets and “big corrections” begin.

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By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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