Watch for This Buy Signal Before Jumping Into Stocks. It's Right 9 Out of 10 Times.

By Geoffrey Seiler – Mar 27, 2026 at 3:15PM ESTKey PointsThe VIX recently rose above 30, with 40 historically being a strong buying signal.The market remains volatile, but investors shouldn't stray from their core strategies.With the S&P 500 (^GSPC 1.67%) roughly 6.2% from its all-time high of just above 7,002 it hit in late January, it wouldn't seem like the market is stressed. However, a popular market reading called the CBOE Volatility Index (^VIX +13.16%), or VIX for short, which measures market volatility, recently reached a critical level. The VIX recently surged above 30, which indicates a market on edge. It basically implies that investors are expecting a 30% move in the S&P 500 over the next 12 months. The VIX is considered a fear gauge, and when it jumps, it's not uncommon to see the market rally. Image source: Getty Images. The VIX soared to above 60 last April after President Donald Trump announced big country-specific tariffs that shook the market. However, the spike in the VIX signaled a bottom in the market, and stocks rallied for the rest of 2025. According to Wells Fargo, when the VIX climbs above 40, the S&P 500 is, on average, up more than 30% a year later. Meanwhile, since 1990, stocks are up over the next 12 months more than 90% of the time when the VIX hits this level. Now, the VIX didn't hit 40, and it has pulled back on hopes of an end to the war with Iran. Make no mistake, though, this is still a market on edge. With worries about the war, oil prices, the economy, and whether artificial intelligence is in a bubble, we could certainly see another spike in the VIX in the coming months that could take us to that magical 40 level. ExpandVOLATILITYINDICES: ^VIXCBOE S&P 500 Volatility IndexToday's Change(13.16%) $3.61Current Price$31.05Key Data PointsDay's Range$27.54 - $31.6552wk Range$13.47 - $52.33 What should investors do? I wouldn't change my overall investment strategy by waiting for a market sell-off and for the VIX to shoot up to over 40. I believe most investors are well served owning one or two core index exchange-traded funds (ETFs) that they continue to dollar-cost average into over time. Two of my favorites are the Vanguard S&P 500 ETF (VOO 1.61%), which mirrors the S&P 500 index, and Invesco QQQ Trust (QQQ 1.95%), which tracks the Nasdaq-100 index. Both ETFs have been strong performers over the long term. If you routinely buy into these ETFs every month regardless of the temperature of the market, you will build wealth over time. However, given the spike in market volatility we've seen this year, I would be tempted to keep some dry powder on the sidelines to be ready to load up on stocks in case of a dip. Be on the lookout for the VIX crossing 40, which has historically been a great buying signal. You can add to your core ETF holdings, or look to buy some of Motley Fool's favorite stocks if this happens.Read NextMar 27, 2026 •By Emma NewberyStock Market Today, March 27: Crude Surges Above $110, Driving Broad Sell-OffMar 27, 2026 •By David DierkingMarket Crash Fears Are Real, but Individual Investors Are Still BuyingMar 26, 2026 •By Jeremy BowmanRecession Risks Are Rising According To Wall Street. Here's What It Means for Investors.Mar 26, 2026 •By Emma NewberyStock Market Today, March 26: Nasdaq Falls 2.4% After Meta and Micron Drop Sharply Mar 26, 2026 •By James Brumley3 Important Reminders for Investors When the Stock Market Hits "Extreme Fear"Mar 26, 2026 •By Johnny RiceBillionaire Ray Dalio Warned of a Coming Capital War.

The Iran War Just Made It Real.About the AuthorGeoffrey Seiler is a contributing Motley Fool stock market analyst covering technology, consumer goods, healthcare, energy, and materials stocks. Prior to The Motley Fool, Geoffrey was a senior equity analyst at Raging Capital Management, a $600 million long-short hedge fund. He holds a bachelor’s degree in history from Haverford College.TMFFindProfitStocks MentionedS&P 500 IndexSNPINDEX: ^GSPC$6,368.85(-1.67%)-$108.31CBOE S&P 500 Volatility IndexVOLATILITYINDICES: ^VIX$31.05(+13.16%)+$3.61Invesco QQQ TrustNASDAQ: QQQ$563.11(-1.86%)-$10.68Vanguard S&P 500 ETFNYSEMKT: VOO$582.96(-1.70%)-$10.09*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.