VIX Volatility and SPX S&P 500 Daily Charts; VIX and SPX Diverging

There are many oddities occurring in markets now as historic price action continues. Since October, stocks continue higher in a parabolic move while the VIX does not move any lower.

Early in 2017, the Fed wine, ECB champagne and BOJ sake was flowing like water with stock moving higher and volatility lower. Oh, what a fantastic world that the central bankers can create. The central bankers maintain their jack boots on the throat of volatility for the last few years to sustain elevated stock indexes.

The bull train is motoring down the tracks with traders singing songs while switching out SPX 2300 hats for SPX 2400 hats and then SPX 2500 hats as October begins. The VIX moves lower with each higher price in the stock market as is expected. The VIX and SPX move inversely to each other and only move in sync less than 10% of the time.

In October, note how the stock market establishes a steeper upward-sloping channel with bulls tripping over each other buying stocks at the ask. That tiny top in stocks in early October occurs as the VIX bottoms. In November, the world changes. The SPX is moving higher but the VIX only prints a matching low; it should be lower.

Then as the stock market continues higher into this year, the VIX prints another low but only matching the prior lows and not lower. With the all-time record highs occurring in the major stock indexes, the VIX should be in the 8's. The VIX printed its record low the day after Thanksgiving in late November at 8.56.

The divergence between stocks going parabolic but the VIX flat hints that stocks are topping out. There is very strong momentum, however, driving price higher like a rocket.

The red circles show market tops and green circles are bottoms. Complacency and fearlessness occurs at the low VIX numbers so these bullish folks are taught a lesson while the high VIX numbers signal fear and panic and the time to buy is when there is blood in the streets. The bearish folks become too bearish at high VIX numbers and they are taught a lesson as the stock market bottoms and begins moving higher.

Stocks are rallying since the year began at that green circle. Oddly, the VIX collapses after that but the stock market refuses to top out. There was a one-day pull back this year but it was so minor that you missed it if you blinked. Going forward, the expectation is for stocks to pull back for a rest as the VIX suggests. Considering the odd action over the last two weeks, something wild may be on deck this month. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.