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There’s an old saying on Wall Street that of course comes from Warren Buffett…
Sell when others are greedy, buy when others are fearful.
It sounds simple — but most traders cannot pull the trigger when fear actually shows up.
I’ve been tracking something that tells me when fear reaches truly extreme levels. And recently, we got a signal that historically leads to double the normal S&P 500 returns.
The metric I am watching is the VIX — specifically when it crosses above 28.3, which puts it in the 90th percentile. That level represents genuine market panic. And on March 29, we hit that threshold.
Here’s what the data shows: From 1990 through today, the average annual S&P return is about 11%. But when you only buy after the VIX exceeds 28.3, that average return jumps to 22%.
And the strength of the move does not stop there. Over two years, the cumulative average return climbs to 37%. By year three, it reaches 48% before things start to normalize again. Historically, extreme fear has not just created good entry points — it’s created some of the best multiyear setups you will ever find.
I know we’ve already rallied about 5% to 7% since that signal triggered. But based on these long-term averages, there’s still plenty of meat left on the bone.
The Multiyear Opportunity Ahead
This is not just a short-term bounce. The data shows these moves can extend for years and they tend to reward anyone willing to step in when fear spikes.
That is why I told you before my vacation that even though we had not hit my ideal price target yet, I was buying anyway. When fear reaches extremes like this, the longer-term picture becomes too compelling to ignore.
But there’s a second signal that just confirmed this setup — and it’s one most traders overlook.
When Fear Collapses This Fast, Markets Always Rally
On April 16, the VIX fell more than 40% over the prior 13 days. That kind of collapse in fear is rare and every time it’s happened, markets have responded with powerful upside momentum.
Looking at prior occurrences, the S&P 500 has moved higher over the next one to two months 86% of the time. And when you extend that horizon to one year, the win rate reaches 100%, with average gains of about 15%. It’s one thing for fear to spike — it’s another for it to unwind this quickly.
Historically, that combination has been incredibly bullish.
So if you’re feeling like you missed the move — or you have FOMO because markets have already bounced — I wouldn’t worry. These signals together point to a setup that has rarely failed and any consolidation from here could be your chance to get positioned.
And there is an even bigger backdrop at play. We may be entering the melt-up phase of the broader AI-driven cycle — something we have discussed for the last two years. The magnitude of this trend is still unfolding and I do not think we have seen the best of it yet.
When you combine structural forces like that with the most reliable fear signals we track, the opportunity becomes even clearer.
This is one of those rare moments where the data is overwhelmingly positive. And when fear reaches extremes like we just saw, the best move is usually the one that feels hardest to make.
Graham Lindman
Graham Lindman Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.Â
P.S. The Bullseye Effect In the S&P 500 Is Changing Everything!
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Fair warning: You’re in for a stunner!
