Rare VIX Signal Sounds Again
The market's "fear gauge" spiked out of the gate this morning
Worries of a coronavirus outbreak have sparked panic selling on Wall Street today, with the major stock indexes all staring at intraday losses of 1% or more. This fear is being seen in the Cboe Volatility Index (VIX), too, which earlier spiked to levels not seen since October -- and sounded a signal seen just 10 other times in the last 16 years.
Specifically, VIX opened today at 17.42, 19.6% above Friday's close at 14.56. While Monday morning gaps of 10%-15% are quite common -- occurring 41 times since September 2003, there have been just 10 occurrences over this time frame where VIX gapped 15% or more on a Monday morning, according to data from Schaeffer's Senior Quantitative Analyst Rocky White.
Looking at the data, VIX tends to run out of steam following this initial pop, averaging a post-signal open-to-close decline of 0.5%. At last check, the index was up 17.5% at 17.11, and earlier topped out at 19.02.
Measuring from its Monday morning open to the next day's close, the market's "fear gauge" has averaged a 5.54% drop following the past 10 occurrences. This is much larger than the 1.2% "after any Monday" retreat averaged over the past 16 years.
