- The stock market volatility indicator points to a low in the S&P 500.
- CBOE Volatility Index futures indicated more short-term uncertainty than long-term uncertainty.
- This type of pullback is usually associated with low points in the stock market.
The CBOE volatility index is one of the The market's favorite fear indicators.and is showing an unusual signal that may indicate a bottom in the stock.
Futures contracts linked to the volatility index, also known as VIX, track the expected amount of market volatility in the future.
Typically, the futures curve slopes upward, reflecting more uncertainty about the short term than the long term.
But on Thursday everything changed.
That's when the second month futures fell below the previous month, according to data collected by Bloomberg. And that so-called forwardation is typically associated with a depression in the S&P 500.
Talk about more anxiety about where the stock market is headed amid recession angst, the bond market crash and rising geopolitical risk.
But contrarian investors could also see it as a sign that the market has gotten so bad that the stock may have finally bottomed out, which they would see as an opportunity to buy.
In September, the volatility index was trading at post-pandemic lowsindicating a strong bull market and fading recession fears.
But in the past two weeks, a surprise Hamas attack on Israel, a still-hawkish Federal Reserve and relentless bond volatility have infused the market with new uncertainty.
In a note published on Thursday, Apollo chief economist Torsten Slรธk wrote that credit volatility has increased recently and remains above pre-pandemic levels.
