Looking at the data from April 7th 2007 to April 7th 2009 (460 trading days) days, the SPX and VIX closed down together 47 times.
The next day the market average close was -.92. Today we closed up 8.
But here is a chart of what the price change of the SPX was for 5 days after this occurred. The average change was -13.88
Next is a chart from March 2008 present. Each Blue square is when the SPX and VIX closed down together. The green squares are when the VIX and SPX closed up together.
If you are playing averages then you can take a position short and possible make some money. But as you can see from the chart, the VIX and SPX closing together doesn't produce to accurate of an indicator of a market top/bottom or reversal. Although since the bear market has started it does point to some further downside when it occurs. One thing to note is that 2 times it did mark the top, that was in November and January. But 2 out of 48 are weak odds to use this as a signal of a top.
I'd appreciate your comments on this as well, I know I've seen some chatter about this on other blogs.
