Issue #32: How to Time the Market Without Timing the Market

Want to know what smart investors watch before buying Bitcoin or stocks? One hidden signal reveals when to go all in, here’s how it works.

Reading time: 3 minutes

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Today, I want to talk about one of the powerful tools in the market: the VIX.

The CBOE Volatility Index, better known as the VIX, is often called the stock market’s “fear gauge.” It is a real-time, forward-looking index that measures the market’s expectation of 30-day volatility in U.S. stocks. Basically, how much investors think the S&P 500 might swing (up or down) in the next month.

The VIX is shown as a yearly percentage of expected market movement. A value of 20 means an annualized standard deviation of 20% for S&P 500 returns or, roughly, about a 5.8% move (up or down) in the S&P 500 over the next 30 days (since 20%/√12 ≈ 5.8%).

I don’t want to dive deep into technical theory or overcomplicate what’s already complex. So, here’s the simple version: you can use the VIX to your advantage, and here’s how.

I calculated two key thresholds:

• The 5th percentile of the VIX is 11.19 (Kalm)

• The 95th percentile is 34.57 (Panik)

So, what happens if you invest at those extremes?

Average Return Under Low VIX Conditions | Source: Toghrul Aliyev, Financial 6-Pack

Buying the S&P 500 at the high end (VIX > 34.57) returned 19.76% after one year. Buying at the low end (VIX < 11.19) returned only 10.39%. The same pattern shows up in Bitcoin as well.

Average Return Under High VIX Conditions | Bitcoin’s return values are skewed because the VIX hit its lowest levels in 2008–2009, just as Bitcoin was launching in 2009. This distorts the data. I attempted to calculate a more balanced mid-range scenario, and the outcome was still similar, around a 50,000% return over three years. But the key takeaway isn’t the number itself. It’s that returns during high VIX conditions were significantly stronger than those during low VIX periods, for both Bitcoin and the S&P 500 | Source: Toghrul Aliyev, Financial 6-Pack

But why?

Because fear creates opportunity.

Most of the time, when the VIX spikes, the market is at or near a local bottom, and that’s when you want to enter.

When the VIX hits lows, markets tend to peak shortly after, though there's a slight delay.

We all know that over time, Bitcoin and S&P 500 trend upward. You could buy at almost any point and come out ahead if you hold long enough. But if you want to boost your return, timing your buys during fear spikes matters a lot.

You won’t time it perfectly. Once the VIX hits an extreme, the move is already underway. Still, you can act smart.

Here’s how:

Historical Levels of the VIX (1990–2025) | The chart shows the Volatility Index over time. Low volatility periods are shaded green, while crisis periods are shaded red. | Source: Toghrul Aliyev, Financial 6-Pack

Check the charts. If Bitcoin, the S&P 500, or your favorite stock has dropped and the VIX is near its historical highs, that’s your signal. Ignore your DCA. Buy with conviction.

If the VIX is at its lows, take the opposite approach. Either sell or wait for a small push upward, then exit.

For long-term holdings, I wouldn’t sell just because the VIX is low. But I would use a high VIX reading as a green light to increase my position. That’s when the market hands you the best deals.

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Thank you so much for reading! See you next week.