The market rally in 2023 came when fear ran high and ended when it subsided, suggesting that Thursday’s raging rally may have some legs. The S&P 500 Index edged higher 5.5% on better-than-expected news on inflation that market participants took as a sign the Federal Reserve may soon halt aggressive interest rate hikes. . But Nicholas Colas, co-founder of DataTrek Research, points out that the rally also comes amid falling market fear levels as measured by the CBOE Volatility Index. Colas warned of euphoria after the major averages posted their biggest one-day gain since 2020. “It’s great to see US stocks up +5% in a day, but stay active. take this stance in perspective and don’t be overly optimistic,” Colas wrote in his daily market note Thursday night. “Our standing advice is the same: keep watching the CBOE VIX Index.” The VIX closed Thursday at 23.5, just above its long-term average of 20 after peaking near 34 in early October. If the index sustains around that level, it could supply the market. some breathing space. “The history of every rally this year is that they started with VIX between 33 – 36 (near/at 2 standard deviations from the mean) and ended when they went up to 19-20,” Colas write. “By this measure, the current rally has some room to run. Going up +5 percent [Thursday] don’t tell us that; VIX as a measure of investor uncertainty. “