A week before the February 27th VIX spike, I talked about the ratio of the SPX to the VIX and posited that the best way to think about that relationship would be to look at the oscillating VIX number in the context of a SPX that is trending approximately 10% over the long term.
The day after the February 27th spike, I revisited the SPX:VIX ratio, which had dropped precipitously from 138 to 76 (on the monthly chart) and commented that I considered a ‘neutral range’ for this ratio to be in the area of 105-115.
This seems like as good a time as any to update the SPX:VIX ratio, which rebounded all the way to 111 on the weekly chart (below) and now sits at 106. In other words, the SPX:VIX ratio is now just about exactly at the midpoint between the extremes of pre-2/27 complacency and post-2/27 panic – and also very close to the long-term SPX trend line that reflects a 10% annual increase.
If it feels like the forces of bullishness and bearishness are at a standstill at the moment, then it is perhaps because at the current levels, the battle is a draw.