Cyclical Analysis: Let’s see what some indicators derived from the Implied Volatility and Options market on the world’s primary market, the US, can tell us.
By Eugenio Sartorelli – www.investimentivincenti.it
Copyright DMF New Media – ETFWorld.co.uk
Reproduction prohibited in any form, even partial
Let’s start with the classic Implied Volatility Index, the VIX (daily data from January 2025 up to the closing values on Friday, November 19th):
This indicator typically has an inverse relationship with the S&P500 Index and, most notably, makes very pronounced peaks corresponding to market lows, as can be easily seen from the chart; for this reason, it is also called the “fear index.”
Currently, the VIX has been at relatively low levels since around late November (see blue arrow), with values remaining almost consistently below its long-term average, which is just above 19. Note how the current VIX values are similar to the 2025 lows reached during other phases of the year.
Simultaneously, the S&P500 Index has risen from its November 20th low (see red arrow) and has been hovering at relatively high levels since late November.
As long as the VIX remains this low, the S&P500 index can attempt to make new highs and reach that 7000-point level that has been anticipated for some months.
Let’s also look at another sentiment indicator related to Volatility: the VVIX chart (daily data):
The VVIX Index is linked to the Volatility of the VIX Index, on which futures and options can be traded. The VVIX Index has characteristics similar to the VIX, but it can be an amplifier of Volatility and sometimes a leading indicator.
The VVIX has been in a sharp decline, especially over the last 2 days (see blue arrow), moving well below its long-term average. Meanwhile, the S&P500 has been in a renewed uptrend from its relative low of December 17th (see red arrow).
If the VVIX index falls further, it also suggests a potential further (albeit slight) rise for the S&P500 in this final phase of the year.
Copyright DMF New Media – ETFWorld.co.uk
Reproduction prohibited in any form, even partial
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