There was an unusual development yesterday, as the S&P futures lost more than -1.5%, and yet the VIX “fear gauge” fell by more than -2%.

Usually the two move in opposite directions, especially on a big down day.  On days when the S&P lost more than -1.5%, the VIX rose 95% of the time.

The knee-jerk interpretation of this is that traders are overly optimistic – after all, they’re estimating future volatility will decline even after a big up day.  That may happen, but it’s not how they usually react.

There are other reasons the VIX may have declined, such as the looming options expiration on Friday, seasonal influences as we approach year-end, and even the myriad volatility products that are now available.

Whatever the reason, the table to the right shows how the futures performed going forward when both the S&P and the VIX declined by a large amount on the same day.

Interestingly, we usually saw weakness in the very short-term, with the futures down 8 out of 11 times.  But from the 8 sessions following that, they showed a positive return every time.

There are more important influences holding sway over the market at the moment, and personally I’m not putting a lot of weight on this particular one.  It’s just notable given the consistent performance of the precedents and the fact that it goes against what the knee-jerk interpretation usually is.