[Platinum Insights] 12.5.22 Market Update: SP500 & VIX

Stock futures price action for the three major indices were down on Monday, putting Wall Street on track to start the week on a sour note as investors await a slew of economic data to gauge the economy’s health and the Fed’s next move. 

Last week wrapped up with a stronger-than-expected payroll report, which has thrown some cold water into expectations for a less aggressive tightening despite markets still seeing an 80% chance that the US central bank will hike rates by 50 basis points in December. 

Now, all eyes are on a report from the ISM that is expected to show that the services sector grew slower in November as tighter financial conditions dented business activity. Oil prices are up this morning.  From a technical standpoint, I want to revisit the S&P 500 index (SPX) as it relates to the VIX (Volatility Index). 

Last week we showed a correlation between the these two charts. The last three time the VIX has traded below 20, we have seen a significant drop in the price action of the S&P. Conversely, when the VIX trades above 32, we see price action increase.  I’ve added a trend line to the chart which is bright pink on both the SPX & VIX to highlight this correlation so you can make your own determination from the charts. 

The trend is your friend until it ends so it will be interesting to see if this correlation continues. Have a great day!  This information is being provided for educational purposes only and is not a recommendation to buy or sell a security.