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< BACK TO ALL REPORTS

VIX-Bashing As A Contrary Indicator

Jason Goepfert
2016-08-09
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Mark Hulbert, a columnist for Marketwatch, is out with another article about how a low level of the VIX simply does not matter for stocks, and it's certainly not a reason to sell.

Mr. Hulbert has been following newsletters for decades, and also spends a fair amount of time (mostly) objectively covering research topics from institutional and academic sources. He consistently puts claims of those touting various indicators through the wringer of statistical analysis, which is sorely lacking in most mainstream media.

He does have a sore spot for the VIX "fear gauge", though, and has published numerous articles explaining why it's misused. His particular bone to pick is with the idea that a low VIX signals complacency and is negative for stocks, while a high VIX suggests fear and is bullish for stocks. He often argues the opposite point.

His articles do make some good arguments. Some are woefully off the mark. But more than anything, it's notable when these articles are posted. Like all publishers that need advertising revenue to cover their expenses, Marketwatch needs to get viewers to click, and that usually means they will trot out a Hulbert VIX-bashing article when most viewers are interested in it, which usually means when the indicator has been low or high for a couple of weeks.

Like now.

The web doesn't contain a fully accurate record of historical articles, so it might look like we're cherry-picking articles. But if we do a web search for Hulbert articles discussing how a low VIX does not mean that it will necessarily rise (or stocks will fall), we get this:

August 19, 2005

The VIX did decline a couple of points over the next month...then rose nearly 50% in the month after that.

November 15, 2006

This essentially marked the low for the VIX, which more than doubled over the next few months.

May 21, 2009

This one is misleading because it suggested that a VIX level of 30+ was "low". That's an odd suggestion given the history of how he looks at the VIX, but regardless it was a good call since the VIX continued to decline.

March 6, 2013

The VIX dropped a couple of points over the next couple of weeks...then jumped more than 60% over the next month.

He has also dissed the idea that a high VIX level is bullish for stocks. Like here:

July 18, 2008

He suggested that the VIX crossing 30 was not a reason to expect the S&P to rally over the next month. Which it actually did.

October 3, 2011

He suggested that a VIX over 30 was a reason to be cautious on stocks, not bullish, since a high VIX tends to lead to below-average stock performance. Stocks did nothing but rise afterward.

May 18, 2016

He touted research suggesting that the rise in the VIX means we should sell stocks. Indices have instead moved to new record highs.

The point of this isn't to engage in schadenfreude over bad market calls - that glass house could easily be shattered (that's why we post an archive of forecasts along with their success or failure, and also my personal portfolio makeup). Plus, some of his points were actually valid within the articles even though the VIX may not have performed as suggested.

The point of all this is to highlight that the compulsion of mainstream media is to cater to what they think readers will be interested in, and when it gets to the point that the VIX has been a topic of conversation, they will publish a Hulbert article telling us why we shouldn't pay attention to it. And while he does make some fair points, the record of when these articles are published has been a modest contrary indicator in its own right.

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