The Volatility Index (VIX) closed Friday at 9.51, its second lowest weekly close since inception. The all-time low weekly close for VIX is 9.48 from the week beginning 12/20/1993 - how's that for a twisted holiday present? Any meaningful weekly drawdown next week and we could challenge the all-time low at 8.89 from 12/27/1993, and any weekly decline will likely mark an all-time low weekly close. We live in unprecedented times, so perhaps some unprecedented VIX readings are on deck.
The irony here is that on July 12 the VIX put/call ratio clocked in at 0.14 with VIX call volume for the session totalling 1,021,277, marking just the 23rd trading session since 2014 with seven digit VIX call volume. Two days later, and the VIX is down -7.6%. Oopsie.
However, if history is any guide, and this time isn't different, then the VIX may be due for a bounce over the coming week. Those participants who were a part of last Wednesday's seven figure call volume are down, but maybe they're not out. Listing the 20 lowest weekly closes for the VIX since inception reveals that the week following these relatively depressed VIX weekly closes has moved higher 17 of 20 samples (85%), on average by 13.94%. No surprise, but the S&P500's moved lower over the same forward 1 week 15 of 20 samples (75%) for an average decline of -0.58%. To be fair, things have been different in 2017. This past week now marks the 8th weekly VIX close in 2017 that we can add to the list of the 20 lowest weekly VIX closes since inception. Of the 7 prior samples that have occurred this year, the VIX's forward 1 week return is higher 4 of 7 for average returns of 5.01%, while the S&P500's declined 4 of 7 for average returns of -0.05%. (much more of a coin flip with less extreme reversions than the history prior to 2017 would have suggested)
Prior to 2017, the saying went "When the VIX is low, look out below". In 2017 the saying's seemingly become "When the VIX is low, look out below...because it's headed to zero".
It will be interesting to see if Mr. VIX can get off the mat over the week ahead.