It's not every day that you see the Chicago Board Options Exchange Volatility Index (the market's “fear gauge”) surge above 25, let alone 65. , panic is extremely high. The VIX briefly touched 65 before retreating in Monday trading. Typically, a spike in the VIX index is painful for investors because it means the inversely correlated S&P 500 is falling, in this case, up as much as 4.2% intraday. The VIX hasn't surged this sharply since 2020, when the S&P 500's COVID-19-related declines were maturing. The market was in a state of high volatility at the time. We believe that another high-volatility regime is coming and that the long-term low-volatility regime that preceded it will come to an abrupt halt. This isn't necessarily a long-term bearish sign for the S&P 500, but it does tell us to expect more pullbacks and corrections as the uptrend becomes more gradual. In May, we introduced clients and our X followers to the possibility of high volatility regimes, and as you can see from the monthly VIX chart, thankfully they tend to be shorter than low volatility regimes. We've enjoyed one of the latter since the end of the bear market cycle in December 2022 or 2022, so it shouldn't be too surprising to expect at least a temporary interruption in the cycle. A new monthly MACD crossover suggests the VIX should establish a higher bottom in 9 months or more. What does this mean for the market? What does this mean for the S&P 500? Since rising volatility tends to correlate with emotional tapes, we can assume that the S&P 500 will see more pullbacks, even without a correction (10%+), and that steep uptrends will take on a flatter slope. The only sign we have of this is the current pullback and the DeMARK indicator's counter-trend indication on the S&P monthly chart, supporting a four-month consolidation. If our long-term trend-following indicator lags the S&P 500, we will be more inclined to reduce our risk exposure. Otherwise, we generally recommend retaining core long positions and reducing more opportunistic/high beta exposures. The rebound in the S&P 500 (i.e. the VIX callback) can be used to hedge some of the risk from a top-down perspective. —Katie Stockton and Will Tamplin Get free access to Fairlead Strategies research here. Disclosure: (None) All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent company or affiliates, and may have been previously published by them on television, radio, the Internet or spread on other media. The above is subject to our Terms and Conditions and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. 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