The Bear Killer Signal Flashes Anew By Lucas Downey, Editor, TradeSmith’s Alpha Signals It may not feel like it, but stocks have bounced rather nicely the last two weeks. Large caps, small caps, and tech-heavy equities are up at least 6% since April 8. 
This is a welcome change. Especially after one of craziest months since 2020. Last week I highlighted three signal studies that suggest, if you hold a long-term perspective, you want to be picking away at stocks right now. It’s early days… But thus far, signs favor the bulls. And here’s just the latest big sign. There’s an uber-rare signal that’s flashing in the volatility arena... And if history is any guide, it’s a bona fide bear killer just like we saw back in October 2023. Today we’ll unpack the latest volatility crash... and what it suggests for the months ahead. Turns out, the old proverb rings true… April showers brings May flowers. The Volatility Crush Is Fuel for the Bulls To kick us off, let’s revisit one of last week’s signal studies. On April 8, the CBOE Volatility Index (VIX) closed above 50. That’s rare: We’ve only seen this level or higher in 2008, 2009, and 2020. While those were excruciating periods to sit through, eventually volatility subsided… paving the way for newly minted bull markets. Below reveals the forward performance for major indices post a VIX close of 50 or greater. Medium- to longer-term, it’s paid off to scoop up stocks in these moments. 
But we all know markets don’t go up in a straight line. There’s a tug-of-war along the way. Generally speaking, stocks can start working again once clouds of uncertainty part… Or investors gain confidence that the worst-case scenario is off the table. We’re seeing the former now… And that could lead to the latter. I firmly believe that the latest bid for equities, while mild, has taken hold simply because the Trump administration is having constructive tariff conversations with countries all over the globe. There is the belief that deals will be announced soon... And that the trade war with China will find a conclusion. Only time will tell. But it isn’t just a bid in equities that’s shaping my overall constructive view. It’s the collapse in volatility. What just happened is quite rare... and is a very bullish omen for stocks. The VIX Bear Killer Signal Extreme volatility can linger. We learned that in the Great Financial Crisis (GFC) and the COVID-19 crash. In 2020, the VIX stayed elevated above 30 for close to two months. In the GFC, the VIX stayed above 30 for more than 18 months. By comparison, the 2025 volatility is short-lived. Below shows how just two weeks ago, the VIX printed north of 50. As of Thursday’s close, we are now below 30 with the latest reading of 29.65: 
Now, this may not seem like anything exciting. But it is. I remember when we fell below the 30 level back in 2020. At the time, the world was healing. People began to imagine that life and business weren’t over. Here we all are, so that assumption proved right. A sub-30 VIX post a 40-plus reading underscores that professional investors are digesting the news and gaining confidence. It happened during COVID. It happened during the GFC. It’s happening now. But let’s put this idea to the test. I went back and culled together all VIX closes of 40-plus since 1990. Then I isolated the first date when the VIX closed below 30. All in all, we were left with a dozen instances ranging from 1998, 2001, 2002, 2009, 2010, 2011, 2015, and 2020. Here’s the reality. The S&P 500 tends to gain after these events to the tune of: - 3-month gains of 5.2%
- 6-month lifts of 9.9%
- 12-month jolts of 19.6%
- 24-month rips of 23.4%
Check it out: 
Clearly, when volatility subsides, you want to start buying stocks. And with a slight tweak, we can see just how rare price action like today’s is. On April 8, the VIX closed above 50. That was the highest level since COVID. And just last week on April 17, it closed back below 30. We’ve only seen that happen twice before: May 8, 2020, and May 19, 2009. Both of those were major bottoms, and major buying opportunities for stocks. Check out the forward returns for each date below: 
For those brave enough to buy in before clouds of uncertainty part, today may prove to be a similar opportunity. Look, I know it’s difficult to imagine a better investing environment. The media rarely pushes a positive narrative. But data helps us cut through the noise... helping us put the puzzle pieces together. I don’t have a crystal ball. I can only lean on evidence for clues. We just might be in the early innings of a new uptrend. Eventually, the bull market will be back on... You want to act during stormy markets. And never forget… April showers bring May flowers. Regards, 
Lucas Downey
Editor, TradeSmith’s Alpha Signals P.S. TradeSmith’s new Predictive Alpha software can help you find the best stocks to add to your portfolio… Our breakthrough algorithm gives everyday investors access to the same kind of AI-powered predictive capabilities previously available only to elite Wall Street firms. It targets modest, high-probability returns like 8%, 12%, or 16% monthly that can add up rapidly – even more so in choppy markets like we’re seeing today. With short trade durations (21 trading days), investors can compound their returns much faster than with long-term plays. And when markets are swinging wildly, like they have been the past few weeks, probability-based investing becomes even more crucial. Our CEO, Keith Kaplan, just held an emergency briefing where he revealed exactly how this groundbreaking software works… and which stocks to avoid in today’s market based its projections. You can watch a replay of this special event for free by clicking here. | 
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