Are you looking for a sign that the stock market is due for a turnaround? There might be a good omen out there now, in the form of the Chicago Board Options Exchange's Volatility Index. The VIX has pushed itself above 40 for the third quarter, a jump of 160 percent, and is now in a territory that has historically predicted market upswings.
Since 1990, in those periods when the VIX has closed above 40 - which it only does around 3 percent of the time - the S&P 500 has returned 3.2 percent on average over the next three months. And over the ensuing 12 months, the S&P has historically returned 19 percent.
The volatility index looks at the prices paid for options that are designed to protect investors from losses in equity investments. It's a contrarian indicator, in that it shows that individual investors are fearing the worst - which means the market has turned into a good buy. That's the theory anyway; we'll see how well it holds up this time.
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