Everybody is losing their minds.
If you’re new to the stock market, I get it.
I’m sure you’ve felt the big down days lately. We haven’t seen the big up days yet.
They’re coming. They always do.
But you don’t need to be a hero to win in this type of market.
You just need to be patient… and prepared.
Will you be ready? Are you with me?
I have something to share with you about VIX spikes…
Big on the VIX
I know you’re worried. Everybody is.
That’s why the Cboe Volatility Index (VIX) hit 60 on Monday.
“Normal” for the “fear gauge” is usually somewhere between 12 and 20. So there’s anywhere from 3x to 5x the normal amount of fear.
Let’s not get sped up, though. We don’t have to overthink it.
We’ve been down this road before.
We have a list of the types of things stocks do when they’re in bull markets. We also have a list of how they behave when they’re in bear markets.
We’re seeing a lot of bear market behavior and little or no bull market behavior right now.
More and more evidence is adding up, and it looks like the regime has changed.
And I want to stress an important point that I think gets forgotten.
The biggest stock market rallies come in bear markets!
You don’t get 6% rallies when we’re in healthy uptrends. You need extreme volatility to spark a divergence like that.
Something like this:
I understand that many of you are new to this whole up and down thing.
That’s normal. I promise.
Volatility is getting extreme, but that’s OK too. It’s information we can work with.
And if you’re patient now, the payoffs can be extraordinary.
I’ve been there before.
We’ll be there again, probably a lot sooner than everybody else thinks.
“The Playbook Has Changed”
Let’s talk about the notation on the VIX chart: “THIS IS NOT THE TIME TO SELL PREMIUM.”
That’s from my friend and options expert, Sean McLaughlin.
I reached out to Sean for some thoughts from an options trader with the VIX spiking like it is.
Here’s Sean…
Today, other than exiting or adjusting losing positions, I’m sitting on my hands. The playbook has changed.
Most of the ideas that the research team and I have come up with over the past 30 days or so were geared toward a different market regime—one where short-term directional bets made sense and risk was easier to manage.
That’s not where we are now.
Markets hate uncertainty. And, right now, we’re swimming in it. I haven’t seen anything quite like this since the Great Financial Crisis.
From the outside looking in, it feels like the lunatics are running the asylum in Washington.
There’s no real sense of direction, just a lot of chaos and posturing, with no apparent plan other than to shock and awe our trading partners into submission with fuzzy, questionable math.
When volatility is this high, some options traders are quick to assume it’s the perfect time to start selling volatility. And, sometimes, it works.
But, in my experience, it’s best to let the VIX have its blow-off top first—let it spike, get stretched, and start showing definitive signs of mean-reverting, as it always does… eventually.
Trying to step in front of a freight train just because it looks tired is rarely a good idea.
Patience pays in this game.
So for now, I’m playing defense—preserving capital and waiting for the right opportunities to emerge. When the market calms down and gives us clearer signals, I’ll be ready to act.
Until then, no hero trades. Just discipline.
I’ll have more on the VIX and “mean-reversion” in the coming days.
I’ll also have more on how we’ll adjust to a new regime, spot emerging patterns, and trade meaningful signals for big upside moves.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs