Study: VIX’s collapse is bullish for VIX and the stock market
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).