Talking Numbers

Is a fear surge coming?

Is a fear surge coming?

The "Fear Index" is showing a little bit more fear.

The CBOE Volatility Index – The VIX – is up 20% in the past week and is currently trading near 17. That's the highest it's been in over a month.

The VIX measures the expectations of volatility in the benchmark S&P 500 index over the next month. Though a large move up in the markets raises volatility, the VIX is sometimes referred to as the "Fear Index" because a large move down also raises volatility.

While the VIX may be nearing 17, it's still below where it was in the beginning of February when it traded above 21.

One of the major reasons cited for this week's run-up is weaker-than-expected numbers out of China. Yet that data should be put in perspective: While industrial output in China for January and February was 0.9% lower than expected, that's because the number reported was 8.6% rather than the expected 9.5%. In the US, industrial output was actually down 0.3%. February's US data gets released on Monday.

As well, China's retail sales in January and February missed expectations by 1.7%. Again, that's because the market was anticipating 13.5% and China reported "only" 11.8%. In the US, retail sales for the same time period were up 1.7% compared to the previous year.

(Read: China Jan/Feb retail sales, industrial output miss targets)

But, China is an important exporter to many of the world economies and any slowdown there is seen as a potential bellwether for global economy. So, with China showing an 18.1% decline in February exports compared to 2013 coupled with the misses in production and retail sales, the markets start to fret a little.

However, CNBC contributor Andrew Busch, editor and publisher of The Busch Update, notes that the VIX is nowhere near some of its more recent spikes over the past few years.

"We had two big spikes up to about 48," says Busch. "That caused the S&P to drop about 20%-ish – about 200 points each time. That was back in April 2010 and then July 2011. But, since December 2012, the VIX hasn't been able to get up above 25 and we've had a pretty strong rally in the S&P."

Busch believes 25 is the key level in the VIX to watch. Should it get above then, it could move up further. And, should that happen, Busch thinks investors should sell their some of their stocks.

Meanwhile, CNBC contributor Gina Sanchez, founder of Chantico Global, thinks the increased expectations in volatility has less to do with China and more to do with what's going on in Ukraine's Crimea region.

(Read: Ugly day for the stock market, but no panic)

This weekend, the Crimean parliament will hold a referendum asking voters to decide whether to join Russia or else to support the 1992 Ukrainian constitution which Ukraine itself no longer uses. The expectation is that the majority of Crimeans will choose to join Russia.

"I do think there's something to this fear trade," says Sanchez. "It's being driven primarily by Russia as opposed to China."

Sanchez sees Russian President Vladimir Putin's goal as pulling former Soviet republics back to Moscow's sphere of influence rather than the EU's.

"Putin's endgame isn't necessarily to absorb all of the old USSR countries," says Sanchez. "All he needs to do is create enough tension and provoke issues in those countries in order to make them too much of a basket case to be absorbed into Europe. [That will] force them to come back to Russia for support."

"So, if all he does is create chaos," says Sanchez, "that is going to drive the VIX up for a little bit."

"The VIX hasn't moved a lot so I think there is potential for more. "

To see the full discussion on the VIX with Busch on the technical and Sanchez on the fundamentals, watch the video above.

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