It’s only happened 4 times in the past five years. The last time it happened was on Feb 27, 2020. SPX had reached a new all-time high of 3393.52 a week earlier and had sold off 12% so far on news of the new coronavirus reaching US shores. We were in the minority of analysts warning of an imminent selloff.VIX, which had been loitering in the teens for months, had gapped from 17 to 25 a few days before, sending its 50-DMA above its 200-DMA. In technical analysis, this is known as a golden cross. It’s normally a bullish move. But, since a rising VIX is typically bearish for stocks, this was the equivalent of a death cross.
We all remember what happened next.Note that only half of the prior instances resulted in a large correction. The other half turned out to be insignificant. VIX was hammered into submission within a day or two, unwinding the 50/200 cross and sending stocks scurrying higher.
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