As market sinks, fear surges—'feeling toppy'

On a wretched day for stocks, the CBOE Volatility Index (or the VIX) jumped 22 percent on Thursday, which likely indicates that investors are growing increasingly concerned about the market's next move. And if fears on Wall Street are correct, then stocks may suffer through an especially difficult few weeks.

"After a long and low period of implied volatility across the board, you are seeing some realization that maybe it is time to buy volatility and maybe get more conscious on risk assets like stocks," said Nicholas Colas, chief market strategist at ConvergEx, on CNBC's "Futures Now." "Clearly there has been a rising level of concern among institutional investors about the market feeling toppy. We've heard that from our clients, and we've seen it from the action on our trading and options desks."

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He said that seasonal trends point strongly to a spooky October.

"Right now the VIX high for the year was in February: 21.44 on February 3. If you go back 25 years to the beginning of the VIX, it's never topped out in February. October is typically a very high volatility month," Colas said on Thursday.

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"I do expect that we get a pullback that rolls through the first half of October. It's seasonally right. We've had a lot of complacency. There are enough headlines to concern people. And let's face it—stocks may not be expensive, but they're not cheap either," he continued.

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For Larry McDonald, head of U.S. strategy at Newedge (now part of Societe Generale), the slow grind higher in the VIX even ahead of Thursday's session foretold the weakness.

"What was strange, coming into today, is that the S&P has essentially been flat since July 3, and the VIX was up 35 percent," McDonald said, also on Thursday's "Futures Now." "That spelled trouble."

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And if the rise in the VIX ahead of Thursday proved ominous, the VIX's one-day surge could lead to still more weakness for stocks ahead.

When it comes to volatility, "we're certainly seeing this expansion today, that sometimes can follow through because it starts to scare people here," said Brian Stutland of Equity Armor Investments. "And I think certainly, if we don't get a big rally in the next couple days and stave off this little selloff here," it could get much worse for the bulls.

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