Key insights
- Volatility has surged recently, with the VIX jumping and S&P 500 futures exhibiting larger daily ranges. While the VIX has remained elevated, it has not yet sustained levels above 22, indicating it is in a transition phase rather than stressed territory. The VVIX has broken out, but not at the pace of the VIX, and the VIX term structure remains in contango. The author leans towards contained volatility for now, but notes that a sustained VIX above 22 coupled with stress in credit markets would signal a bearish shift.
You don't need to go too in depth with analysis to know that volatility has exploded over the last few trading sessions. But what's happening behind the scenes is crucial for active portfolio management and swing trades.
The VIX lived in the calm regime band from 14-18 for much of May, which corresponded with the indexes grinding out new all-time highs with small daily ranges. On Friday June 5, the VIX put in a nearly 40% jump and an ES (S&P 500 futures) daily range around 3x the 30-day average. Realized volatility was extremely compressed at highs, so this move in the VIX was not only fear, but also volatility playing catch-up.
As of today, the VIX is around 21.8, the upper end of what I'd call the transition/elevated band (18-22), continuing to meet resistance at stressed territory at >22.
The VIX regime transition path is 1) VIX exits prior range and stays out for days, 2) the VVIX (volatility of the VIX itself) changes character, and 3) Term structure flips from contango to backwardation, or vice versa. (When in contango, the spot VIX is lower than the long-dated VIX futures, and in backwardation, this is reversed).
Where we are right now: 1) The VIX has remained elevated for several days but keeps hitting 22 without holding it, 2) VVIX has broken out from a two-month lull but hasn't risen at the pace that VIX has, 3) The VIX at 22 is below long-dated VIX futures at 22.85, which means still in normal contango.
The question from here isn't necessarily whether the market is crashing, it's whether the VIX settles in transition, pushes into stressed (>22) and holds, or mean-reverts toward calm over the next week or two. With the VVIX/VIX ratio coming down and normal contango conditions, I am leaning towards contained for now. VVIX is now at 107 vs 130+ in past stress events (March/April/October 2025, March 2026). The credit picture is not yet registering stress but if it does, and VIX holds above 22, I would change my mind and not seek any new swing (equities) entries.
VIX and VVIX below