History of VIX Topping Signals – 2007 to 2022

A VIX  topping signal occurs when the VIX makes a higher bottom vs. a higher S&P 500 (SPX) top.  Sometimes there can be more than one signal before the SPX records its ultimate bull move high.  Recently there was a VIX topping signal that was subsequently invalidated.  On  06/09/23 the VIX made a new low from its most recent peak on 03/13/23 which implies more SPX upside action.  A study of effective VIX topping signals  gives us clues as to when the next topping signal could occur.

The weekly SPX and VIX chart courtesy of Trading View illustrates their history from 2006 to the present.

Of the eight significant SPX tops from 2007 to 2022 seven of them had effective VIX topping signals.   The false signal occurred in 2015 and was probably caused by the very narrow trading range from May to August 2015.   The SPX 2015 ultimate high was made on 05/20/15 at 2,134.72 with a VIX topping signal.  Then on 07/20/15 with the SPX at 2132.82 the VIX went below its 05/20/15 reading.   This did not result in an SPX move above its 05/20/15 peak.  Just the opposite occurred, about two weeks later the SPX had an 11% mini crash.

Recently momentum for U.S. stocks has been extremely bearish.  On 06/08/23 and 06/09/23 the SPX rallied 1.4% while the Advance/Decline line fell!  We’ve entered the territory of “crazy town”.   

If there’s another VIX topping signal it could happen soon, perhaps within two weeks.  A close up look at the SPX peaks in 2010 and 2011 may help to define the time range for a top signal.

The daily VIX and SPX chart shows us what happened at the SPX April 2010 top. 

The bull phase that began in March of 2009 terminated in April 2010, followed by a 17% multi- month bear market.  The final segment of the 2009 to 2010 bull market began in February 2010 and had only one VIX topping signal lasting 10 -trading days.  This is an exception, usually there’s more than one signal. 

The SPX chart from 2011 shows two VIX topping signals.

The VIX signal on 02/18/11 indicated what was the penultimate 2011 top,  followed by a correction within a still developing bull market.  The length of this signal was 8 – trading days.

The ultimate SPX 2011 top had two VIX  low points.  The first on 04/20/11 at 14.30, the next on 04/28/11 at 14.27.  This second marginal new low is like a stock struggling to go lower and can be viewed as a signal within a signal.  The entire signal covered a period of 7 – trading days.

The most recent and now invalided VIX topping signal lasted from 05/01/23 to 05/19/23 or 14 – trading days.  

If the VIX low of 13.50 made on 06/09/23 holds, the next VIX  topping signal could happen in 7 to 14 trading days.  This would  mean the SPX goes into a small correction followed by a new high and possibly the ultimate top.