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While everyone is screaming “SELL,” the Volatility Index (VIX) suggests it is time to buy – at least for an oversold bounce.
The stock market’s fear gauge is on the verge of generating its sixth buy signal of 2026.
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 five 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 four out of the five 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. And, the buy signal last month preceded a 250-point rally in the S&P in just two weeks.
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.
With an 80% success rate so far this year, traders have done well to buy stocks when the VIX told them to do so.
The VIX is now, once again, 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 – a VIX buy signal, combined with the oversold conditions we looked at on Wednesday could lead to one heck of a short-term bounce.
Best regards and good trading,
Jeff Clark
Editor, Market Minute