(Click the chart for a larger view.)

The chart above is a long-term look at the CBOE Volatility Index, also known as the VIX. It measures implied volatility in options prices.

When the VIX is low it usually means investors are pretty complacent about future stock prices (buyers aren’t willing to pay much in the way of extra premium). When the VIX is high it usually means investors are worried about future prices (so they are willing to pay a higher price for option protection).

The chart above shows the different ranges of the VIX during the last bear market as compared to the recent bull market. What the VIX has been telling us since last summer is that we may have already entered a new bear market.

If it can decisively move below the 19-20 level this may prove to be a false tell. However, if it bounces of the current level back above 20 we should probably expect further weakness in the stock market in coming months.

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