Did somebody shove the VIX in a meat locker?
The market's fear gauge has certainly cooled off since it peaked around 65 earlier this month. It is down another roughly 6% today, hovering around 15.
The VIX is on pace for its lowest close since July 23, according to Dow Jones Market Data. Its 59% decline from its peak on Aug. 5 over the past eight trading days is its largest eight-day decline on record.
UBS strategist Maxwell Grinacoff and his colleagues point out that the VIX marked its fastest 25-point-plus spike from its lows and its fastest pullback from that spike in only a week or so.
"Similar to the degree of the spike, the speed of mean reversion appears too far, too fast when we look towards history," they wrote. "We anticipated a cooling CPI to take some wind out of the VIX sails, but there are still aftershocks when VIX spikes to such a degree, especially if recession is still potentially on the table."
SentimentTrader senior research analyst Jay Kaeppel isn't all doom and gloom. He points out that a spike in the VIX typically marks extremes in investor fear, which tend to be followed by higher stock prices.
"The recent spike and reversal guarantee nothing but do lend favorable weight to the bullish side of the weight of the evidence ledger for stocks in the year ahead," he wrote.
The market will take it. The Dow was up 465 points, or 1.2%. The S&P 500 was up 1.4% and the Nasdaq was up 2.1%. And the Russell 2000 was up 2.5%.
The latest economic data have dispelled a bit of the recession fears that sent the VIX surging and stocks plunging.
Of course, there's plenty of data left between now and the Federal Reserve's September meeting, so don't get too comfortable.
For more on Jay Kaeppel' analysis and other market insights, visit SentimenTrader.com.