VIX, the paroxysm of fear is behind us The international equity market suffered a bearish shock between the beginning of February and the beginning of April, against the backdrop of the trade war. The trade war known as “reciprocal tariffs” initiated by the Trump Administration caused the MSCI World stock index to fall by over 20%.
Now, since the States have entered into a sequence of trade diplomacy, the equity market has rebounded and volatility has dropped one floor.
Can we say that the paroxysm of fear is behind us, based on the prism of technical analysis of the financial markets?
To answer this question, we'd like to take a look at two interesting charts.
1) Firstly, the implied volatility chart of the stocks that make up the SP 500 index, the VIX. The nickname of this index is “the fear index”. Its calculation is based on the price of call and put options on the stocks making up the SP500 index. Remember that the S&P 500 is considered the benchmark index of Western finance
2) The second chart of interest is a quantitative analysis of financial markets. Quantitative analysis of financial markets is one of the disciplines of technical analysis of financial markets, and here it concerns the percentage of SP 500 stocks above the 50-day moving average.
It is precisely the application of technical analysis to these two charts that allows us to argue in favour of a selling paroxysm reached during the first fortnight of April.
For the VIX, the fear index has been rejecting downwards since the 60 level, with a chartist “black cloud cover” structure (Japanese candlestick terminology) and a bearish resolution of the RSI technical indicator from its weekly overbought zone. This signal historically signified that the paroxysm of fear was over.
For the percentage of S&P 500 stocks above the 50-day moving average, the quantitative bullish signal is very convincing. Historically, every time this percentage has fallen below the 20% threshold in an abrupt fashion, only to rise back up again, it has signalled the final phase of the bear market, and that's what's happening again this April 2025, as you can see on the chart below.
CONCLUSION: Through the prism of technical analysis of the financial markets, a number of clues point to a paroxysm of fear reached in the first half of April. Of course, only the fundamentals and the outcome of trade diplomacy can confirm that the low point is well and truly behind us.
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