For several weeks the Volatility Index (VIX) and the S&P 500 (SPX) have both been trending higher. Could this be the prelude for an important SPX peak or another false sell signal.
The daily SPX and VIX chart courtesy of Trading View illustrates their relationship since May 2025.
Normally VIX and SPX move in opposite directions. When SPX is trending down VIX spikes up are very effective identifying SPX bottoms.
However, when SPX trends up, VIX bottoms do not signal SPX peaks. VIX higher bottoms are the prelude to SPX tops. The reason is that the VIX is composed of Put and Call options. As the SPX nears an important peak, some traders increase Put option exposure for hedging. The increase in Put options causes VIX to rise.
Unfortunately, there could be false signals before the ultimate SPX peak is made. There have been three false VIX signals since July. In mid-July there was a false signal that lasted eight trading days. Another in late July of three trading days, and a mid – August signal lasting three trading days.
The big difference with the current signal is that it’s been in effect for more than a month. The first half saw a shallow higher VIX bottom. In the second half the VIX rise is steeper.
The ideal condition for a major U.S. stock peak would be a higher VIX bottom and only one of the three main U.S. stock indices: SPX, Dow Jones Industrial Average, and Nasdaq Composite making a new all-time high.
On 10/03/25 all three main U.S. stock indices made all-time highs, this implies more upside action into at least next week.
Four Dimension Trading 