DataTrek Research warns that the VIX, commonly called the market’s “fear gauge,” remaining elevated for an extended period could herald the start of a bear market. Co-founder Nicholas Colas highlights that the VIX’s 30-day average has held at 21.4 for 12 consecutive days, staying above its long-term historical average of 19.5.
The VIX tends to behave differently in bull and bear markets: historically, values above roughly 19.5 are more common during bear markets, while lower readings usually accompany bull markets. Colas points out, however, that short-lived sharp spikes to higher thresholds—for example, readings around 27.3 or 35.1—have often created buying opportunities that preceded market rallies.
Colas explains the apparent paradox: a rapid, dramatic rise in volatility can prompt decisive policy responses or investor repositioning that help stabilize markets and set the stage for a rebound. In contrast, the greater risk lies in volatility that stays modestly but persistently elevated over weeks, which can sap confidence and limit the conditions needed for sustained market recovery.
Investors and market watchers should therefore be attentive not just to headline VIX levels, but to how long the index remains above its historical norms. Short spikes can be transient catalysts for rebound, whereas prolonged elevation may signal a more troublesome shift in market dynamics that warrants closer scrutiny and potentially more defensive positioning.