VIX Spike: Complacency’s Bill Coming Due. What Happens Now?
The VIX simply posted its third-largest one-day spike since 1990. That wasn’t a fluke, as a result of low volatility at all times begets excessive volatility, and historical past reveals what tends to return subsequent.
🏛️ Market Brief – Nvidia Breaks, The Market Holds
In the week the world’s most essential chipmaker misplaced its founder, the S&P 500 nonetheless gained 2.5%. The index closed Friday at 7,561.67, erasing most of final week’s VIX-spike harm. The Nasdaq Composite added 2.3% and the Dow 2.1%. Nvidia went the opposite manner. The inventory fell 12.8% for the week to $162.85 and now sits 32% under its October 6 document of $239.24.
The shock arrived Thursday. Jensen Huang resigned as CEO, president, and board member, efficient instantly, following an unbiased board investigation into his private conduct. CFO Colette Kress is now interim CEO. Harvey Jones, the board’s first-ever chair, is operating the seek for a successor. As we specified by Nvidia Stock Slides As Huang Exits, the corporate had no succession plan and no COO. Shares opened down 13%, touched $148.80, and closed down 4.3%. The market isn’t repricing Nvidia’s chips. It’s repricing the uncertainty over who runs the corporate.
The funding cracks beneath “the AI trade” widened, too. Thursday’s SoftBank: Another Warning On AI Funding coated SoftBank’s ¥1.1 trillion quarterly loss, roughly $7 billion. Its five-year credit score default swaps sit close to 500 foundation factors, the widest since October 2022. OpenAI additionally pushed its fairness providing into 2027, delaying a liquidity occasion SoftBank was relying on. Yet CoreWeave jumped greater than 20% that day on a $132.5 billion backlog. It additionally carries almost $47 billion of debt. Such is the market now. It’s sorting AI winners from AI debtors one stability sheet at a time.
While Nvidia dominated the headlines, the macro knowledge didn’t give the Fed a lot room. The October CPI report confirmed a 0.4% MoM improve on Tuesday. Notably, core costs additionally rose greater than anticipated, up 0.3%. Fed Governor Waller additionally mentioned {that a} half-point hike “should be considered” in December.
Furthermore, Friday’s PPI, which rose 0.3%, left producer costs up 6.5% from a 12 months in the past. That is the quickest tempo since November 2022. Interest charges have been observed: the 10-year yield climbed 29 foundation factors to five.15%, the greenback index gained 1.1%, and present house gross sales fell to a 3.75 million annual charge, the bottom since August 2010, which tells you precisely the place increased mortgage charges are already doing their work.
Even although the market superior for the week, Nvidia bears watching because it carries one of many largest weights within the S&P 500. It additionally sits on the middle of the capex story behind this 12 months’s earnings development. Underneath the two.5% achieve, the tape was rotating slightly than stress-free. All 11 sectors rose, led by power at 5.4%. The semiconductor ETF (SMH) nonetheless gained 4.9%, at the same time as Nvidia slid. Meanwhile, Bitcoin fell 9.8% to under $70,000, gold misplaced 4.9%, and the VIX eased to 19.35 from 25.64.
The thread to observe into subsequent week is easy. Nvidia’s Tuesday earnings now carry a management query on high of the numbers. Meanwhile, the Fed’s December hike is getting tougher to speak the market out of.
📈Technical Backdrop – Above The 200, Stuck Below The 50
The S&P 500 completed the week at 7,561.67, up 2.5% and three.3% under the October 6 document shut of seven,818.93. Monday’s 2.35% achieve did many of the work, reversing the prior week’s breakdown in a single session. After that, the rally ran out of consumers. Thursday’s excessive of seven,653 stopped simply wanting the 50-day transferring common at 7,667. The index then slipped in every of the final two periods.
While the value motion was extra bullish, the transferring averages inform a cut up story. The market index at present sits 3.0% above a rising 200-day common at 7,340. This leaves the first uptrend intact. However, it stays under each the 20-day imply of seven,613 and the 50-day imply of seven,667. More notably, the 50-day has additionally began to roll over, down from 7,679 every week in the past.
Beyond the transferring averages, RSI rebounded from 33.5 on the November 5 low to 47, a impartial degree with no directional momentum. Furthermore, the MACD stays under its sign line, at −42 versus −41 index factors. Nonetheless, the hole has narrowed sharply from every week in the past. If the MACD can handle a crossover early subsequent week, it could flip the market momentum sign again to a purchase.
Notice the cluster of crimson dots on the proper fringe of the chart above. Four of the six periods from October 30 to November 6 closed under the decrease 2-SD band. That’s the densest cluster since March. The index has since climbed again to roughly half an ordinary deviation under its 20-day imply. The decrease band now sits at 7,396. That’s the extent the place a retest would look washed out once more.
Sector breadth is the strongest proof this week, and it cuts each methods. Measured in opposition to every sector’s 50-day relative pattern versus the S&P 500, 10 of 11 sectors are outperforming. Six are greater than 5% above pattern. Health Care (+9.3%) and Staples (+9.2%) are probably the most stretched. The equal-weight S&P 500 (RSP) can also be 4.2% above its relative pattern. That is actual “broadening.” The catch is that the one oversold teams, Technology at −7.8% and semiconductors at −11.8%, characterize the most important single block of market worth within the index, so the remainder of the market can outperform for weeks with out lifting the S&P 500 to a brand new excessive.
The bullish case making the rounds this week is easy. If 10 of 11 sectors are beating the index, the market have to be wholesome. It is, under the floor. But a cap-weighted index can’t make a brand new excessive whereas its largest sector sits 8% under pattern. Either expertise catches as much as the market, or the market comes down to fulfill expertise. Such is why Tuesday’s Nvidia report issues for the entire tape, not only for one inventory.
For shorter-term merchants, the investing playbook for subsequent week is pretty easy. If the market can shut above the 50-day at 7,667, it could reopen the trail to the document at 7,819. For now, Initial assist is Friday’s low close to 7,500, however under that, the 200-day common and the November 5 low converge at 7,340 to 7,350.
Most crucially, an in depth under July’s swing low at 7,316 would break the sample of upper lows. Such a break would argue for elevating money and including hedges to portfolios. For now, till the index reclaims the 50-day, we proceed to suggest trimming prolonged defensive positions as energy develops. We need to add to development shares however solely in measured tranches with affirmation, not on a bounce that has already stalled as soon as.
In summation, the one degree to look at this coming week is the 50-day transferring common at 7,667. The index failed there on Thursday, elevating our warning degree. A second failure after Nvidia experiences would flip a wholesome pullback right into a range-bound year-end.
🔑 Key Catalysts Next Week
This coming week, two tales will transfer the markets. The first, as famous, is Nvidia’s first earnings report with out Jensen Huang. The second is a Fed that retains telling markets a December hike is coming. Nearly all the things else on the calendar feeds a type of two narratives.
Nvidia experiences fiscal third-quarter outcomes Tuesday after the shut. Consensus expects about $2.49 per share on income close to $109 billion. That sits barely above the corporate’s personal steering of roughly $108 billion. The numbers matter lower than normal this time. Investors will need three issues: steering, how a lot of the backlog leans on buyer financing, and what Colette Kress says in regards to the CEO search. Whether the House look requested of Huang for November 18 will nonetheless happen is now unclear.
Moreover, the Fed calendar may be very crowded. Chair Kevin Warsh speaks Monday at midday ET. Then John Williams speaks Monday, Tuesday and Wednesday. Christopher Waller, who floated a half-point hike after CPI, speaks Tuesday and Friday. The October FOMC minutes land Wednesday afternoon. Futures nonetheless value a hike on the December 8 to 9 assembly, so any speaker leaning in opposition to it could be information. Such is the bar for a dovish shock proper now: one Fed official merely sounding affected person would rely.
Notably, the info slate this coming week will middle on the patron. October retail gross sales arrive Tuesday with consensus at 0.8%, alongside industrial manufacturing. Home Depot and Disney report Tuesday morning, then Lowe’s, Target and TJX on Wednesday. Walmart closes the retail circuit Thursday morning. Housing begins observe on Wednesday, after this week’s dismal existing-home gross sales report. Thursday brings jobless claims and the Philadelphia Fed survey, and Friday wraps up with the ultimate Michigan sentiment learn.
Most importantly, pay shut consideration to the retail gross sales management group. The core retail gross sales group excludes autos, gasoline, and constructing supplies. This specific studying is what feeds immediately into GDP. With mortgage charges above 7% and shopper costs nonetheless rising 0.4% monthly, a delicate quantity can be the primary clear signal that increased charges are lastly reaching consumers.
The Nvidia earnings report on Tuesday, adopted by a Congressional listening to on Wednesday, is the occasion that strikes all the things else, and the asymmetry runs each methods. Weak steering on high of a management vacuum would verify the market’s repricing. A poor listening to on high of that may probably pull the index again towards its 200-day common. Unfortunately, the upside case is much less apparent. However, a clear beat, credible financing commitments, and a relaxed succession course of, with the inventory already deeply oversold, may discover consumers, at the least quickly.
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💰 VIX Spike Was Complacency’s Bill Coming Due
On Wednesday, November 4, the S&P 500 delivered what Fortune known as one of the best post-midterm rally in 44 years, and the VIX closed at 16.61. It was solely a second of bliss because the market plunged almost 5% the next day. On Thursday, the VIX spiked, closing at 28.18. That 69.7% VIX spike was the third-largest one-day bounce since 1990, trailing solely February 2018 and December 2024. As we coated in final week’s Midterm Election Goes Blue, the election provided the headline, and leverage provided the promoting. None of that ought to shock anybody. What ought to get your consideration is how reliably this sequence repeats.
Complacency Always Ends, And It Usually Ends Fast
Look at what got here earlier than Thursday. Over the prior 63 buying and selling days, the VIX averaged 16.2 and closed under 17 on 48 of them. It bottomed at 14.21 on September 22, with the S&P 500 close to 7,765. Meanwhile, hedge fund gross leverage was close to 310%, a five-year excessive, in accordance with Goldman’s prime ebook. Such is what “calm” appears to be like like proper earlier than it isn’t.
The economist Hyman Minsky spent a bulk of his profession on one concept: stability breeds instability. The cause is that when volatility stays low, “risk models” inform traders that they will safely carry extra fairness publicity. For instance, volatility-targeting funds will mechanically add leverage, whereas choice sellers gather premium that seems like “free money” as a result of nothing ever appears to occur. Every a type of selections is smart. However, when mixed, they create a market by which one unhealthy headline sends everybody towards the identical slim exit directly.
Look on the chart above, and see that the shaded stretches mark each interval since 1990 when the VIX averaged under 15 for roughly three months. Each one ended the identical manner, with a burst of outsized day by day swings in each instructions: 1997 and 1998 after the mid-Nineteen Nineties calm, 2008 after the 2004 to 2007 lull, 2018 after the quietest market in a era, and 2025 after the calm of early 2024. The greatest days and the worst days arrive collectively, they usually arrive after the calm.
Low volatility hides danger whereas traders quietly pile extra of it on.
Notice the beginning factors within the chart above. Seven of the ten largest one-day VIX spikes since 1990 started with the VIX under 20, together with this one. The February 2007 spike began from 11.15. The largest surges don’t come from markets which can be already scared. They come from markets that stopped worrying.
Why Ultra-Low VIX Readings Are A Warning, Not A Confirmation
A reader wrote in just a few months in the past with a good query: “If the VIX is low, investors are confident, so isn’t that bullish?” It sounds proper. The drawback is what the VIX truly measures. It’s the value of portfolio insurance coverage. A low studying tells you insurance coverage is affordable; subsequently, a low VIX tells you safety is on sale. It says nothing about whether or not you’ll want it.
The following knowledge makes the purpose clearly. Going again to 1990, I ran each buying and selling day and requested how typically the VIX at the least doubled throughout the following twelve months, sorted by the place it began. There are two essential findings value noting.
- From readings beneath 12, it doubled 72% of the time, and the median peak ran 2.2 occasions the beginning degree.
- When readings have been above 35, it doubled simply 3% of the time.
In different phrases, volatility can’t fall a lot under 10. However, it could simply triple from these ranges. That asymmetry is the entire story.
This is the place Bob Farrell’s Rule #1 reminds us that markets return to the imply over time. Importantly, the “mean reversion” concept applies to volatility as properly, with out exception. Low volatility begets excessive volatility as a result of the calm itself encourages the conduct that ends it. That’s why the time to BUY safety is when the VIX is sleepy, and no person desires it.
What Stocks Did After The Biggest VIX Spikes
Here’s the excellent news. Historically, worry spikes like this one have been higher entry factors than exit factors. After the ten prior one-day VIX spikes of fifty% or extra, the S&P 500 averaged 2.8% one month later and 12.0% a 12 months later, increased in eight of ten instances. Widen the web to all 24 prior spikes of 40% or extra, and the twelve-month achieve averaged 18.8%, with 22 of 24 increased. For comparability, a random day since 1990 produced 10.2% over the following 12 months, constructive 81% of the time.
This is why it’s important to be very cautious with “averages,” as they disguise the trail. The November 2021 spike was adopted by a 13.7% loss over the following 12 months, as a result of it ran straight into the Fed’s 2022 mountain climbing cycle. With December hike odds close to 99% after Tuesday’s CPI report, that’s the analog I’d watch most intently. The path additionally will get uneven even when the vacation spot is ok. After December 2024, traders nonetheless needed to sit via the April 2025 selloff.
That brings us again to a degree we made in 10 Best Days: A Meme For Every Bull Market. As proven within the day by day value adjustments chart above, these “best days” cluster proper subsequent to the “worst ones.” Monday’s 2.35% achieve was one of the best session since April, and it got here two buying and selling days after the worst session since April 2025. Selling in a panic means lacking the rebound. The actual lesson is to handle danger earlier than the spike, whereas safety is affordable, slightly than after it arrives.
Why The Setup Still Favors Rotating From Value Back To Growth
This week’s Daily Market Commentaries laid out why the circumstances for a rotation again towards development are largely in place. Technology’s RSI sat at 29 on Friday, and semiconductors closed 31% under their June excessive, a bear market by any definition. In Tuesday’s commentary, we confirmed that tech went from 17% above its decade-long relative pattern on October 2 to six% under it 5 weeks later. The total 2026 premium is gone. Yet working revenue for eight AI leaders rose 71% from a 12 months in the past within the second quarter. Prices broke. Earnings didn’t.
Positioning is the opposite half. Hedge fund nets sit at five-year lows, lengthy/brief funds simply made the most important gross publicity lower since Covid, and Thursday was the most important put-buying day in CBOE historical past. Trend-following CTAs sit at −3.3 commonplace deviations on U.S. equities, roughly the 1.ninth percentile of the previous 12 months. Meanwhile, Health Care is greater than 15% above its 200-day common, a stretch seen solely twice since 2005. The pressured sellers have largely bought, and the “safe” commerce is now the crowded one. That’s why our issue rotation mannequin flipped from worth to development final week, following the setup we outlined in Value Had Its Run.
Someone will let you know that oversold can at all times get extra oversold. They’re proper. The Nasdaq 100 (QQQ) remains to be sitting just below its 200-day common, and as we famous in Is Nvidia Still Cheap?, the bounce will get the headlines, however the reclaim is the sign. Nvidia experiences on November 17, and Jensen Huang has been requested to seem earlier than three House committees the following day. Such is the chance with washouts, which are inclined to really feel completed proper earlier than the retest. Credit spreads have additionally widened by about 60 foundation factors over six weeks, which to this point appears to be like like repricing slightly than a break.
What Should Investors Do After A VIX Spike?
History tilts the percentages towards increased costs from right here, and November via April has been the strongest stretch of the 12 months in midterm cycles. Odds aren’t a plan, although. Here is how we’re approaching the remainder of the 12 months.
The greatest time to arrange for volatility is when no person thinks they should.
Thursday following the election was a powerful reminder that markets don’t ship invites earlier than they reprice danger. Unfortunately, the traders who received harm probably the most weren’t unsuitable about AI. They merely carried an excessive amount of leverage right into a quiet tape and assumed the quiet would final. Rebalance into energy, hold your stops sincere, and when the VIX spike settles again into the low teenagers, resist the urge to consider it should keep there.
The VIX might be again within the low teenagers quickly sufficient. That’s when the following invoice begins coming due.
🖊️ From Lance’s Desk
This week’s #MacroView weblog explores the world of bonds. What are they, how they work, what determines yield, and the way they work in a portfolio.
Also Posted This Week:
📹 Watch & Listen
Stock market volatility is rising as NVIDIA’s sharp decline threatens the market’s current restoration. After efficiently testing its 200-day transferring common, the S&P 500 has recovered almost all its post-election losses however now faces renewed resistance at its 20-day and 50-day transferring averages.
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📊 The Weekly Market Dashboard
Weekly technical overview throughout key sectors, danger indicators, and market internals
💸 Market & Sector X-Ray: Market Gains Ground
Despite all of the turmoil following the elections, the market rallied sufficient final week, to maintain the market throughout the ongoing consolidation of the previous six months. The profitable check of the 200-dma is encouraging, however we have to see some observe via shopping for and a choose up within the Technology sector if we’re going to transfer the markets increased into year-end.
📐 Technical Composite: 47.39 – Buyers Return As Expected
The technical situation improved a bit final week after the post-election plunge. As famous final week, “However, the reduction reversed the previous overbought condition back to more extremely oversold typically precedes rallies.” We noticed a little bit of a rally final week, and will get some observe via this coming week. Rebalance danger and stay tactically cautious till circumstances enhance additional.
🤑 Fear/Greed Index: 55.08 – Holding At Neutral
With the broader market rallying final week, exterior of Technology, the underlying market allocation and sentiment stay extra impartial though rising a bit from final week. There was a rise within the Commitment of Traders fairness allocations; nevertheless, investor sentiment stays extra bearish. With the market nonetheless decently oversold short-term, an additional bounce is feasible.
🔁 Relative Sector Performance
As proven under, the Healthcare, Staples, Financial and Real Esate have change into extra overbought, whereas the Technology is probably the most oversold. Historically, these extra excessive deviations, as famous final week, have been a precursor to a rotation, whereas that didn’t occur this previous week, doesn’t imply it gained’t.
📊 MFBR Index (Money Flow/Breadth Ratio Indicator)
The Money Flow Breadth Ratio (MFBR) mannequin is a rules-based fairness allocation framework that makes use of weekly S&P 500 cash circulation knowledge to generate purchase, promote, and impartial alerts. The MFBR systematically adjusts portfolio fairness publicity in response to the course and persistence of institutional capital flows. It goals to scale back drawdowns whereas capturing the vast majority of market upside.
“As of November 13, 2026, with the S&P 500 at 7,561.67, the Money Flow Breadth Ratio (MFBR) stands at 50%, down from a peak of 80% set 13 weeks in the past and rising versus 45% the prior week. The trailing four-week change is -5 share factors, and the near-term pattern has rolled over. This locations the indicator within the 50-60% vary. The uncooked zone sign reads NEUTRAL, however the mannequin nonetheless flags a TOP REVERSAL, with 30 factors now off the height. Read that NEUTRAL as a zone label, not as recent affirmation – the mannequin reached this band by falling out of overbought, not by increase from under.
Bottom line: maintain the goal weight. The roll-over off the 80% peak is actual and price watching, and it has now carried the gauge into the 50-60% band. Falling readings right here have nonetheless averaged +5.2% over 26 weeks with a 73.1% win charge, so that is neither a chase nor a de-risk. A break under 50% would lower the grid to 58%; a transfer again above 60% would restore a full obese.”
📊 Sector Model & Risk Ranges
We famous final week that “Energy remains extremely elevated above long-term means, and Healthcare has now joined that club.” It is value rebalancing danger after final week’s rally, exterior of Technology. Communications, Industrials, Discretionary, and Financials are prolonged. Continue to rebalance danger, as we nonetheless anticipate the rotation to Technology, specifically, to happen.
Have an amazing week.
Lance Roberts, CIO, RIA Advisors