VIX Low, Time To Go (SPX, VIX)

The CBOE Market Volatility Index (VIX) is down 1.16, or 4.64%, to 23.82 in early trading Monday. After spiking over 40 in May and over 30 in June the VIX has come down considerably.

The VIX is the implied volatility on the S&P 500 (SPX) index options for the next 30 days. The VIX is often referred to as the "fear guage" because when investors are worried the stock market will fall they buy put options. As demand for puts exceeds supply, prices of puts go up. This raises implied volatility and the VIX index.

During time of maximum pessimism (when everyone is bearish) the VIX rises to extremely high levels. This is the perfect time to buy stocks because if everyone is bearish, there is nobody left to sell to. No sellers means the market's downward momentum will soon cease. In contrast, when the VIX is low, everyone has already bought into the market.

It's no wonder the VIX hit a three-year low in early April right at the market peaked. With the VIX currently under 24, it may be time to heed the old adage: "VIX low, time to go".