Tuesday, March 27, 2007

SPX:VIX Back to Predicted Level

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.


Brian said...


Keep up the great work! This stuff is very interesting.

Just FYI, I have my computer resolution at work set to 1024x768. With this resolution, the right side of this chart gets cut off. I can't see anything past about 1/1/2007. When it's set to 1280 horiz, the chart looks fine.


Bill Luby said...

Thanks for your support and the heads up on the resolution problem, Brian. The original image is here.

Shelly said...

Hi. I really like your blog. Was wondering if you want to add it to my directory? Thanks Shelly


Bill Luby said...


Go right ahead. I'd be delighted if you were to add this blog to your directory.

Good health to you and your family!


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