This week has been a little strange toward the end in terms of standard market relationships, specifically with those of equities (seen by the S&P 500) and Oil, and then equities and the Volatility Index (VIX).

Generally, oil moves in the same direction as stocks while the Volatility Index moves opposite stocks, but over the last few days, that relationship has been strained intraday.

Let’s take a look, first starting with Oil and the S&P 500.

For reference, StockCharts does not show Crude Oil prices ($WTIC) intraday, so I’m resorting to comparing the USO Oil ETF with the SPY (S&P 500 ETF).

The USO fund is colored black (like oil) and scaled on the left side, while the SPY is red and scaled on the right side.

As you see, and as you’ve probably observed astutely in the past, oil and stocks tend to move together as they’re driven by expectations on broader (even global) economic expansion or contraction.

This was the case until a separation and relationship breakdown began on September 14th that continues to this day.

Oil (futures) fell from the $78 per barrel level to the $73 level this morning, and you can see that sharp multi-day (straight down) fall on the chart of the USO.

And what did the SPY (stocks) do?  Held up sideways.  Perhaps that’s due to Options Expiration (today) or other stock-related factors (better than expected technology reports this morning), but whatever the reason, it’s strange from an inter-market perspective.

And if that wasn’t enough, we have another solid inverse relationship temporarily breaking down – that of the S&P 500 and the VIX (Volatility Index).

This time we can compare the S&P 500 Index (red – right) to the VIX (blue – left) intraday.

Given that the Volatility Index is also called the “Fear Index,” it tends to move inverse to equities.

That’s been the case in early September as the blue and red lines criss-crossed, but a strange thing happened over the last few days.

The VIX spiked sharply higher on the morning of September 15th when stocks really didn’t move that much.

Stocks were held-up at the prior 1,117 support line but the VIX still surged noticeably higher.

In fact, the VIX rose intraday while stocks bounce higher off support (highlighted) which isn’t usual.

Since September 15th, the relationship returned (mostly) as stocks traded sideways while the VIX trailed lower, with the exception of another solid up-spike on this morning’s sell-off.

The fact is that stocks have remained flat, peaking at the 1,130 level while the VIX remains higher than its September 14th bottom of 21.  The index now trades just under 22.0.

Strange?  Yes.

It’s definitely something to keep watching closely as the Options Expiration concludes and things – perhaps – return to normal.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade