Analysts Clutching at Volatility Index

The CBOE Volatility Index, or VIX - which typically moves in the opposite direction of the S&P 500 - on Tuesday deviated from its norm and tilted mildly lower in a move one analyst attributes to a potential shift in the stock market's course, reports MarketWatch.

"Typically, if the S&P moves 3%, VIX will move 10% in the opposite direction And, when the VIX is stubborn, and doesn't move as much you'd expect, it is often forecasting a change in direction," said Randy Frederick, director of trading and derivatives, Schwab Center for Financial Research.

The VIX, a measure of the market's expectations of volatility over the next 30-day period, is often referred to as the fear gauge, but Frederick rejects the description.

"I don't like to use the term 'fear gauge' because then you're saying fear and uncertainty are synonymous. You can have uncertainty without having a lot of fear," he said.

Exactly, the VIX measures uncertainty rather than fear. It is still stuck in the 40s, which is moderately high and what traders would like is to see it back firmly in the low 30s or even 20s. Ultimately, earnings will determine a successful recovery, and on this front there has been some little-publicised activity as stock indices shed their most pathetic performers for new, and hopefully better, companies.

Keep a watch on companies about to enter the S&P 500 as the mere fact of being in the index means their share price increases as funds tracking the index have to buy the stock to balance their portfolio.