S&P 500: VIX/VVIX Inflection Indicates Upside Potential

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What’s the point of using fancy indicators ratios such as the VVIX/VIX ratio, when you can simply use the , or the itself? You know that I’m a fan of using the VVIX/VIX ratio in helping me spot inflection points in indices, particularly the S&P 500 index.

The idea is to observe the higher lows in the VVIX/VIX index, meaning the VVF low from this week is higher than the VVE low of mid-March (as shown in the chart below). This is similar to the lows in March and May of 2021, when VVB and VVD coincided with crucial bottoms in LowB and LowD, respectively, and displays that bearishness in indices will likely transition to a gradual upside ahead.

Tying the fundamental rationale to the thesis as mentioned above, the rise could be supported by Beijing’s latest vow to stimulate the economy ahead of May Day Holiday, a dovish 50-bp rate hike from the Fed, and propagation of forward-looking optimism by Apple (NASDAQ:) and Meta Platforms (NASDAQ:).