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Volatility continues to seep lower, and the VIX "fear gauge" has shown signs of reversing its medium-term trend. For the first time in nearly two months, it has closed below its 50-day moving average, suggesting a regime of lower volatility ahead.

To get more history, we use the old VIX calculation (VXO).

This ends one of the longer streaks above its 50-day average since 1986.

One the VXO has dropped below its 50-day after having been above it for at least 30 days, with a high of at least 30 during its streak, the S&P 500 has usually struggled in the short-term, with some big swings. But it was typically a sign that the most of the losses were behind.

The thumbnail charts show just how volatile the next few weeks tended to be, with almost immediate losses, then a recovery.

For the VXO itself, it was mostly the opposite pattern, with a jump during the next week, then solid losses.

This is further sign of a lasting recovery, but doesn't say much about the near-term risk to those who are just now trying to jump in.

Once again, we almost got an "official" thrust, but didn't quite make it.

Starting in late March and triggering multiple times since then, there have been days with overwhelmingly positive buying pressure (see here and here and here and here).

Even so, at the start of this month we narrowly missed a commonly-defined breadth thrust. By the smallest of margins, breadth wasn't quite good enough to trigger a Zweig Breadth Thrust. As we saw at the time, that was not a good reason to worry.

Heading into Monday's session, we were on track to trigger another type of breath thrust, popularized in a white paper by Wayne Whaley over a decade ago. Like the Zweig thrust, it relies on very precise parameters. And like the Zweig concept, we barely missed triggering those parameters because of one bad day. Out of 3 possible triggers, only 1 of them actually exceeded the required threshold.

Because of a relatively large number of declining issues on Monday, stocks barely missed triggering one of the conditions. But it does't really matter, it's the concept that counts.

There were some periods in history when there was a surge in Up Issues, but not Up Volume. Or maybe breadth was good, but the return in the S&P wasn't so great. Over the past week, though, we've seen a surge in all three measures, even if they didn't quite exceed the precise thresholds given in the white paper.

Below, we can see every time since 1962 when Up Issues and Volume both hit a very high level, along with a big surge in the S&P 500.

Like we've seen after a lot of thrust-type signals, returns in the shorter-term were mixed to weak. But over the medium- to long-term, these were important signs of a change in buyers' mentality. The overwhelming display of buying interest was an important sign that sentiment had shifted enough to be permanent, or at least enough to lead to another 6-12 months of a get-me-in mentality.

According to a popular charting service, a huge number of stocks within the S&P 500 have flipped to buy signals.

The indicator measures how many stocks within the index are currently on buy signals. A buy signal is given when the Point & Figure chart is showing an uptrend.

According to Investopedia:

Contrary to some other types of charts, like candlesticks, which mark the degree of an asset's movement over set time periods, P&F charts utilize columns consisting of stacked Xs or Os, each of which represents a set amount of price movement. The Xs illustrate rising prices, while Os represent a falling price.

Technicians use P&F charts in various ways, from simple reversals to trendline analysis to pattern recognition. For example, the P&F pattern carved out in recent months is very close to what happened from January through June 2009.

The reason this is getting attention now is because almost all stocks within the S&P 500 were on sell signals in March, and in recent sessions most of them have flipped to buy signals, as noted by StockCharts.

To say this is unusual is an understatement. Going back to 1996, it's only occurred 3 other times, and their implications were consistent.

While all of them saw a period of consolidation after the surge in P&F buy signals, at least over the next week or two, they all resumed their march higher in the months ahead.

The risk/reward table was impressive as well.

Even though these signals triggered during (or more accurately, after) a few of the most volatile stretches in 25 years, maximum losses over the next year were limited to -3.5%, while maximum gains were all in the double digits.

If we relax the parameters to get a larger sample size, the returns were not robust. The table was filled with at least temporary failures as these lesser extremes led to a quick resumption of the downtrend.

So the big question is whether we can rely on the tiny sample size based off an obscure indicator. Not really - we certainly wouldn't put a lot of weight on it.

But it's at least interesting to note that an overwhelming percentage of stocks have reversed enough on a percentage basis to trigger these buy signals, and every time it's cycled from so many sell signals to so many buys, it has coincided with important inflection points.

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