• 340 days Will The ECB Continue To Hike Rates?
  • 340 days Forbes: Aramco Remains Largest Company In The Middle East
  • 342 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 742 days Could Crypto Overtake Traditional Investment?
  • 746 days Americans Still Quitting Jobs At Record Pace
  • 748 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 751 days Is The Dollar Too Strong?
  • 752 days Big Tech Disappoints Investors on Earnings Calls
  • 753 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 754 days China Is Quietly Trying To Distance Itself From Russia
  • 755 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 758 days Crypto Investors Won Big In 2021
  • 759 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 760 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 762 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 762 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 765 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 766 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 766 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 768 days Are NFTs About To Take Over Gaming?
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Frank Hogelucht

Frank Hogelucht

Individual investor, trading for a living since 2007, taking a statistical approach in combination with historical market data and addicted to developing market-neutral algorithmic trading…

Contact Author

  1. Home
  2. Markets
  3. Other

Christmas Eve and the VIX (being up big)

Cartoon

Major market indices (S&P 500, Dow Jones Industrial) are currently closing

On Friday's session, the fact that the VIX (CBOE Volatility Index) closed up big (+6.60%) ahead of a long weekend although major market indices closed almost unchanged (SPY down -0.14%, S&P 500 down -0.16%, and DJ Ind. up +0.12%) got a lot of attention around the blogosphere, regularly referring to the bearish implications of such divergence.

But in order to potentially separate the rumors from the facts, I checked for those occurrences where the SPY (S&P 500 SPDR) did not lose more than -0.25% on close of a session immediately preceding a weekend or an exchange holiday when the VIX either closed up +6.0% (or more), or closed in the top quartile of its daily trading range and up at least +3.0% on the same day (either a huge gain on the close, or at least a long white candle).

Table I below shows all occurrences and the SPY (S&P 500 SPDR)'s historical performance (since 01/01/1990) over the course of the then following 1, 2, 3, 4 and 5 sessions (and the minimum number of sessions - if any - until a higher close was achieved), assumed one went long on close of a session where the setup listed above had been triggered in the past.


(* no close below trigger day's close during period under review)

At least from a historical and statistical point of view, there is nothing bearish about the huge divergence between the VIX and major market indices (quite the opposite). When the setup listed above had been triggered in the past, the SPY (S&P 500 SPDR)

  • ... closed higher on the then following session on 14 out of 20 occurrences (or 70% of the time);
  • ... lost more than -0.51% on the then following session on only 1 out of those 20 occurrences;
  • ... closed at a higher level 2 sessions later on 16 out of those 20 occurrences (or 80% of the time);
  • ... closed higher +1.0% or more 2 sessions later on 5, but lower -1.0% or more on only 1 out of those 20 occurrences (or 80% of the time); and
  • ... never looked back and did not post a single close below the trigger day's close over the course of the then following 5 sessions on 9 occurrences, but did not post a single close above the trigger day's close on only 3 occurrences.

In addition, the session immediately following the Christmas Day (exchange) holiday shows a significantly positive bias.

Table II below shows all occurrences and the SPY (S&P 500 SPDR)'s historical performance (since 01/01/1990) over the course of the then following 1, 2, 3, 4 and 5 sessions (and the minimum number of sessions - if any - until a higher close was achieved), assumed one went long on close of Christmas Eve (or the session before if Christmas Eve was a non-trading day) in the past.


(* no close below trigger day's close during period under review)

With respect to the session immediately following the Christmas Day (exchange) holiday, the SPY (S&P 500 SPDR)

  • ... closed higher on 15 out of the last 20 occurrences (or 75% of the time);
  • ... lost more than -0.26% on only 1 out of the last 20 occurrences (2005);
  • ... closed at a higher level 2 and 3 sessions later on (almost) 3 out of every 4 occurrences (or 80% of the time); and
  • ... closed higher +1.0% or more 2 and 3 sessions later on 7, but lower -1.0% or more on only 2 (3) out of the last 20 occurrences.


Conclusions:

With positive seasonalities and setup(s) triggered on close of Thursday, December 23, from my perspective probabilities and odds are tilt in favor of a higher close on Monday, December 27.

Successful trading,

 

Back to homepage

Leave a comment

Leave a comment