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On Friday, the VIX closed above it's upper bollinger bands (20,2) for the second consecutive day. In fact, on Friday, the VIX painted a black candle completely outside of it's band. Looking back over the past decade for similar closes, we find 23 occurrences where the VIX close was lower than it's open and the VIX low as above it's upper bollinger bands. In 20 of those cases 87%), the S&P 500 was trading higher within 3 days.
| Ticker | Date/Time | Close | VIX | 3Day+ | %Chg N1 | %Chg N2 | %Chg N3 |
|---|
| SP500 | 11/19/2003 | 1,042.44 | 18.65 | 3.00 | -0.84 | -0.69 | 0.92 |
| SP500 | 5/3/2004 | 1,117.49 | 16.61 | 1.00 | 0.18 | 0.36 | -0.31 |
| SP500 | 1/4/2005 | 1,188.05 | 13.93 | 0.00 | -0.36 | -0.01 | -0.16 |
| SP500 | 3/23/2005 | 1,172.53 | 13.88 | 2.00 | -0.09 | 0.15 | -0.61 |
| SP500 | 4/18/2005 | 1,145.98 | 16.41 | 1.00 | 0.59 | -0.74 | 1.22 |
| SP500 | 5/16/2005 | 1,165.69 | 15.67 | 1.00 | 0.70 | 1.70 | 2.18 |
| SP500 | 7/7/2005 | 1,197.87 | 12.48 | 1.00 | 1.17 | 1.80 | 2.03 |
| SP500 | 1/17/2006 | 1,283.03 | 11.87 | 2.00 | -0.40 | 0.16 | -1.68 |
| SP500 | 1/23/2006 | 1,263.82 | 13.58 | 1.00 | 0.24 | 0.07 | 0.79 |
| SP500 | 4/10/2006 | 1,296.62 | 12.04 | 0.00 | -0.78 | -0.66 | -0.58 |
| SP500 | 5/24/2006 | 1,258.57 | 17.13 | 1.00 | 1.14 | 1.72 | 0.10 |
| SP500 | 7/17/2006 | 1,234.49 | 17.75 | 1.00 | 0.19 | 2.05 | 1.19 |
| SP500 | 12/8/2006 | 1,409.84 | 11.91 | 1.00 | 0.23 | 0.12 | 0.24 |
| SP500 | 8/1/2007 | 1,465.81 | 23.26 | 1.00 | 0.44 | -2.23 | 0.13 |
| SP500 | 8/16/2007 | 1,411.27 | 30.44 | 1.00 | 2.46 | 2.43 | 2.54 |
| SP500 | 10/22/2007 | 1,506.33 | 21.38 | 1.00 | 0.88 | 0.63 | 0.54 |
| SP500 | 11/8/2007 | 1,474.77 | 25.32 | 3.00 | -1.43 | -2.41 | 0.43 |
| SP500 | 1/18/2008 | 1,325.19 | 26.27 | 2.00 | -1.11 | 1.01 | 2.03 |
| SP500 | 3/17/2008 | 1,276.60 | 31.10 | 1.00 | 4.24 | 1.71 | 4.14 |
| SP500 | 6/9/2008 | 1,361.76 | 20.78 | 0.00 | -0.24 | -1.93 | -1.61 |
| SP500 | 9/10/2008 | 1,232.04 | 23.80 | 1.00 | 1.38 | 1.60 | -3.19 |
| SP500 | 10/16/2008 | 946.43 | 66.51 | 2.00 | -0.62 | 4.12 | 0.91 |
| SP500 | 9/2/2009 | 994.75 | 28.41 | 1.00 | 0.85 | 2.18 | 3.08 |
| SP500 | 10/2/2009 | 1,025.21 | 27.98 | 0.00 | 0.00 | 0.00 | 0.00 |
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2 comments:
What about instances where the close was higher than the open, and the close was above the Upper BB?
Similarly, what about when the close is below the lower BB (hollow or filled candle)?
1. Vix closes above upper BB and Vix close higher than open: S&P closed higher 43 out 59 times within the next 3 days. That is a 72.88% historical odds which is not much better than any random close 1 to 3 days later.
2. However, when the VIX closes above it's upper BB for TWO CONSECUTIVE days AND vix closes higher than vix open, the odds are much more favorable: There have been 13 such occurrences in the past decade with 12 higher S&P closes within the next 3 days (in 9 of those cases the higher close was the very next day).
I should note that these ST setups are fulfilled with today's higher close, however, from an intermediate term persepective, when the VIX closes more than one day above it's upper bands, generally it reverses and goes on to tag it's lower bands (implying continued higher prices).
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