What the VIX is really saying about the stock market

The volatility in the stock market might be viewed, to quote "MacBeth," as "full of sound and fury, signifying nothing."

The market has been quite choppy of late but does that truly signify an increase in volatility?

This is where your measurement tools make a difference.

If you look at the CBOE Volatility Index, also known as the market's "fear gauge," the answer is clearly, "no." The VIX, as it is commonly known, is 50-percent below its highs of late 2014.

1-year VIX chart

The chart pattern suggests that volatility is not only going down, but could go down even more, despite the fact that it sits at at the lowest level of the year. In fact, the VIX is hovering at just above multi-year lows. The index peaked at about 23 late last year and has since declined steadily as market averages have approached, and in some cases, hit new all-time highs.

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So recent readings on the VIX could also be seen, to an extent, as a contrary indicator … the lower the VIX, the less investors fear a decline in the market, thus becoming complacent about risk and then, ironically, at risk for a counter-trend move of some consequence.

Away from the simple reading of volatility measured by the VIX, there have been big daily swings in the market and large monthly moves, back and forth, for all four months of this year.

The number of one-percent and two-percent market moves has picked up this year when compared to last, giving the appearance of more action than there really has been, given the narrow range within the market has traded.

S&P 500 1-year chart

We used to joke in the newsroom about someone who claimed the market has been "volatile in a narrow range," which some of us viewed as an oxymoron. The market can be choppy, but you can't have real volatility if the swings are not wild, unusually large and the market's range unusually broad.

The entire range for the S&P 500 year-to-date is about 6 percent, from January's trough to Friday's peak. In that time, the S&P is up a modest 2.86 percent. After all that noise!

It's something of a volatility paradox, or, potentially, a lot of sound and fury signifying nothing.

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There's a saying on Wall Street that says, "volatility increases at tops and bottoms."

The S&P and Nasdaq both hit new highs as we approach the "sell in May and go away" window. It most certainly might pay to take profits in some high-flying, high-priced, and richly valued stocks, as prudent portfolio management dictates.

However, with the world still awash in liquidity, a Federal Reserve rate hike seemingly moving further and further away, and earnings topping reduced expectations, this may not yet be the time to be overwhelmingly bearish on stocks.

It's certainly not a time for complacency either, but the VIX is also telling us that the upward drift in stocks is not over just quite yet.

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Commentary by Ron Insana, a CNBC and MSNBC contributor and the author of four books on Wall Street. He also editor of "Insana's Market Intellgence," available at Marketfy.com. Follow him on Twitter @rinsana.