Strong Upside Day for Stocks, VIX Higher

A few people have commented that today seems unusual in that stocks are strongly higher, but the VIX has also moved up from yesterday's close. Normally, option-related volatility tends to drop as stocks rise: since 1990, the correlation between one-day changes in the S&P 500 Index (SPY) and VIX has been a statistically significant -.68.

I went to the all-purpose database and found only 13 occasions since 1990 in which SPY has been up more than 2% on the day and VIX has closed higher on the day. Two days later, SPY has averaged a change of -.32% (5 up, 8 down), compared with the average change of -.23% (87 up, 79 down) for the remainder of instances when SPY rose by 2% or more with a falling VIX.

That's a small sample and not a statistically significant difference, but it's certainly an indication that such short-term strength does not confer a bullish advantage in the near term.
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