Volatility Index Signals a Pullback: Strategists

The CBOE Volatility Index (VIX), the mostly widely used gauge of fear in the market, is down almost 20 percent over the last three months. When should investors expect volatility to return? Dan Deming, trader at Stutland Equities, and Dan Cook, senior market analyst at IG Markets, discussed their insights.

“Right now, there is some pessimism out there in the back months, there's some volatility buying and protection going on," Deming told CNBC.

Deming said the markets are “very oversold” and sees some “bearish sentiment.”

“We’re working off some of that right now…but above 1,100 [on the S&P], people are looking to protect against further potential volatility.”

(Editor's note: Art Cashin agrees—but only on S&P caution range. See: "Market Is Overbought, Will Test 1125-1135")

In the meantime, Cook said the low VIX is actually signaling coming investor nervousness.

“It could get very volatile,” he explained. “We’ve had a nice run through September so it wouldn’t be surprising to see a pullback—we’re also approaching the highs of June and August on the S&P, and could see prices get rambunctious if it can’t break through there.”

Scorecard—What They Said:

  • Cook's Previous Appearance on CNBC (Sept. 10, 2010)
  • Deming's Previous Appearance on CNBC (Jul. 27, 2010)

Market Views—Across the Board:

CNBC Slideshows:

CNBC Data Pages:


Tuesday's Dow Laggards (as of this writing):


Bank of America

JPMorgan Chase

Walt Disney

American Express


No immediate information was available for Deming or Cook.