On Friday, $VIX closed above its 200 day moving average. The last day it traded above this average was December 14, 2011. With volatility seemingly entering a bullish phase, is this a bullish or bearish setup for buying SPY?
The Rules:
Buy SPY at the close if $VIX closes above its 200 day moving average, and $VIX was not above the 200MA the previous day.
The Results:
Using all SPY history, there were 60 occurrences of this setup. After 50 days, 60.38% of trades were winners.
The win rate combined with the higher average winning trade has resulted in SPY averaging just over 2% after 50 days.
The market has a bullish bias. While this test reflects that, it also demonstrates that a climbing $VIX does not necessarily signify a death knell for the markets.
That’s certainly an unexpected result, very interesting. Especially useful in these volatile times, helps remind us to keep a level head. Thanks Wood, really enjoy these setups.
Thanks, no problem. I think the next test I will run will require $VIX to be beneath its 200MA for X days. Depending on the number of samples, it might be more helpful to our current situation.