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As the VIX Continues to Drop, Is S&P at 1,000 Far Behind?
CNBC.com | May 20, 2009 | 01:09 PM EDT

The stock market's main volatility gauge continued to decline on Wednesday, fueling optimism that the recent rally had further to go.

The Chicago Board Options Exchange's Volatility Index fell below 28 after closing below 30 on Tuesday for the first time since September, when the collapse of Lehman Brothers triggered the dizzying selloff in stocks.

Since the VIX began pulling back from the 50 range in early March, stocks have followed suit, jumping 30% from their recent lows. Many on Wall Street are hoping the trend will continue.

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  • "This is certainly a positive for the market," says Quincy Krosby, chief investment strategist at The Hartford. "It's apparent investors believe this market is headed higher at least in the short term, albeit with days that you're going to see the market sell off with a little bit of profit-taking."

    If the VIX falls to 25, that could propel the Standard & Poor's 500 to 1,000, says Richard Sparks, senior analyst at Schaeffer's Investment Reserach in Cincinnati.

    "It moves counter to the market, so the recent strength we've had, we've seen a continuing decline in the VIX," Sparks says. "I would consider the trend to be in place and not see a reason why the market can't continue higher."

    Yet even with the VIX continue to decline, the state of the market remains uncertain.

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