Low VIX is Good For The S&P 500 As We Enter June

by Geoff Garbacz | 05/31/2021 12:05 PM

The S&P 500 should be in good shape as we head into summer trading. Why?

Pretty simple. The VIX is under 20. When the VIX is below 20 stocks are in their "Camelot Phase" of the market as our buddy Phil Erlanger notes time and again.

[Image 2]

The above charge is our VIX Model that track when you want to be invested and when you should be concerned. Currently, the model is green and that means you are making money. Remember the color of money is green not red.

As such, the VIX remains in trouble if you are betting on some downside action and/or volatility in the S&P 500. The VIX moved below 20 on a closing basis at the end of the March and has not been able to closea month above 20 since then. The VIX did get above 20 in May, hitting 28.93 on May 13th, before closing at 16.76. We continue to believe in the logic of Phil Erlanger that the "Camelot Phase" occur for stocks when the VIX is under 20. This is a big plus for stocks as we close in on the end of the second quarter and move into summer time trading.

Remember a falling VIX is a good thing for stocks, not a bad thing, and a rising VIX is a concern despite what some might lead you to believe. Just because the VIX is low does not mean that stocks are going to peak imminently. If you believed in that logic, then you missed a nice return for April and May. Can you afford to lag behind again in June?