VIX-VIXEQ Regime Detector

The VIX-VIXEQ Regime Detector is an market structure indicator that compares the CBOE Volatility Index (VIX) with the CBOE S&P 500 Equal Weight Volatility Index (VIXEQ) to identify distinct market volatility regimes.
It analyses the relationship between index-level and constituent-level volatility, and helps investors to detect regime changes that often precede major market moves.
Credits: Idea suggested by m_chromatic Thanks a lot!

What It Measures

• VIX measures implied volatility of S&P 500 index options (cap-weighted, dominated by mega-cap stocks)
  
• VIXEQ measures implied volatility of equal-weighted S&P 500 constituents (reflects broader market volatility)
  
• The ratio between these two metrics reveals whether volatility is concentrated in mega-caps or dispersed across the broader market.
  

When VIXEQ rises faster than VIX (ratio > 1.0), it indicates that constituent stocks are experiencing higher volatility than the index itself. This divergence often signals:

• Increased market stress
  
• Breakdown in correlation
  
• Potential regime transitions
  
• Mean reversion opportunities
  

Five Market Regimes in the Indicator
The indicator uses adaptive thresholds based on rolling statistics to classify markets into five distinct regimes:

🔵 CONCENTRATION (Ratio < threshold): Mega-cap dominance, Low dispersion, Healthy market structure
🟢 NORMAL (Ratio near mean): Balanced volatility, Healthy market conditions, Standard risk environment
🟡 ELEVATED (Ratio moderately above mean), Early warning signal, Rising constituent stress, Watch for deterioration
🟠 DISPERSION (Ratio significantly above mean), Broad market stress, Elevated constituent volatility, Defensive positioning warranted
🔴 SYSTEMIC (Ratio > 1.5σ above mean), Crisis conditions, Extreme constituent stress, High mean reversion potential

The indicator includes z-score calculations to measure how extreme the current spread is relative to historical norms.

Recommended Timeframe

• Daily (1D): Optimal for most use cases - balances signal quality with responsiveness
  
• Weekly (1W): For macro positioning and long-term regime context
  
• 4-Hour: Not recommended - too noisy for structural regime analysis
  

Technical Notes

• Uses request.security() to fetch VIX and VIXEQ data
  
• Ratio is scaled by (ratio - 1) × 10 for chart visibility alongside spread
  
• Actual ratio values are displayed in the table and labels
  
• Adaptive thresholds recalculate on every bar based on rolling statistics
  
• All regime classifications update in real-time