From Andrew Wilkinson of Interactive Brokers:
Typically seen as a contrarian indicator the VIX, also known as the fear gauge, rose to its highest reading in about six years this week when it peaked at 59.06. The index uses option prices of calls and puts on S&P 500 index components and is a measure of the premium demanded by option sellers.
Because option implied volatility is a key component of option prices, the higher the premium demanded for both calls and puts, the higher the calculation of VIX. When the VIX spikes in times of greatest uncertainty, investors often use this as a signal for an "all-clear," to reenter the market in the short term at least. Until recently, equity investors identified such spikes at readings of between 30-40, which are clear to view on a chart when they occurred in January, March and July this year.