The VIX Is Telling Us It’s Time to Bet on a Bounce

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The Volatility Index (VIX) has flipped. The setup that was leaning bearish two weeks ago is now leaning bullish. The VIX is on the verge of generating a broad stock market buy signal.

The S&P 500 has fallen 4.4% over the past two weeks. It has erased nearly all the gains from May. And, in the process, it has knocked some of the excessive bullishness out of the market.

Now though, the VIX is telling us it’s about time to bet on a bounce.

Take a look…

VIX buy signals occur when the index closes above its upper Bollinger Band and then closes back inside the bands.

Bollinger Bands indicate the most probable trading range for a stock or an index. Whenever a chart moves outside of its Bollinger Bands, it signals an “extreme” condition – which is vulnerable to a reversal in the other direction.

In the case of the VIX, these extreme conditions trigger buy and sell signals for the broad stock market.

On Wednesday, the VIX closed above its upper Bollinger Band. When it closes back inside the bands, the VIX will generate a broad stock market buy signal. That could happen as soon as today.

We’ve seen four such buy signals – or buy signal clusters, when the VIX generated two or more buy signals within just a few days of each other – so far in 2026. Here’s how the S&P 500 behaved following each of those signals…

The stock market rallied in the days immediately following three out of the four VIX buy signals.

The S&P 500 rallied 150 to 200 points in a week following the signals in January and February. The buy signal in late March marked the start of an enormous, intermediate-term rally phase.

The one failed buy signal in early March preceded a 400-point drop in the S&P 500. That was painful. But, it led to an even more significant buy signal later in the month.

For the most part, though, traders did well to buy stocks when the VIX told them to do so.

So, just as the VIX was warning traders to be cautious two weeks ago, it is now on the verge of telling us to buy.

There are still plenty of reasons to be cautious on the stock market as we head through 2026 and beyond. But, for the next several days – and maybe even the next few weeks – the bulls will soon have the advantage of a VIX buy signal.

Best regards and good trading,

Jeff Clark
Editor, Market Minute