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VIX Poised to Cross Below 20

The CBOE Volatility Index , or investor fear guage, is about to cross below 20 for the first time since August of 2008. This morning the VIX hit as low as 20.10.

The VIX is used as a measure of expected volatility in the month ahead. Values above 30 are usually associated with higher investor fear and volatile times while values below 20 tend to imply a calmer time.

On average historically, the S&P rises on days that the VIX crosses below 20. The VIX has crossed to close below the 20 marker 142 times. Avg gains for the S&P when this happens...

  • Avg S&P gain on day VIX crosses below 20: up 82% of the time, avg gain of +.74%
  • 1 week later: up 56% of the time, avg gain of +.26%
  • 1 month later: up 57% of the time, avg gain of +.73%
  • 3 month later: up 65% of the time, avg gain of +.95%
  • 6 month later: up 63% of the time, avg gain of +2.57%

Excluding the 10 occurrences since the 2007 market highs (i.e., during the financial crisis), the longer term avgs go up:

  • 1 month later: up 61% of the time, avg gain of +1.3%
  • 3 month later: up 70% of the time, avg gain of +2.3%
  • 6 month later: up 68% of the time, avg gain of +4.9%

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