Stocks Plunge As Implied Volatility And The VIX Spikes

By Michael J. Kramer of Mott Capital Management

Founder/CEO at Mott Capital Management, LLC • Oct 17, 2026 at 3:35 PM EDT • Updated Oct 17, 2026 at 3:35 PM EDT

The S&P 500 and Nasdaq 100 fell as the VIX spiked, signaling an unwinding of the summer semiconductor rally.

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The VIX spiked on Friday, which is what we were talking about last week, when the VIX was relatively low, and the better chance was that it would rise. The market pulled back about 1% on two separate days, finishing the week about 2% lower on the S&P 500 (SPY), while the Nasdaq 100 (QQQ) was down almost 5.5%. The VIX rose almost 5 points.

The VIX 1-day closed at 23.25, and because it resets daily, it tends to drop the next day. I wouldn’t be surprised to see it fall sharply on Monday and the market rally nicely. Whether that carries through is the more interesting question. One-month implied correlation rose, but it is still only around 10, so I don’t think it rises much going into earnings season. I’d be more surprised if it didn’t rise after earnings season.

The S&P 500 chart looks like a rising wedge, but I think support is pretty firm around 7,550, and maybe all the way down to 7,300. Net gamma exposure is also supportive, with the put wall at 7,650 and more put gamma at 7,600, 7,550, and 7,500. That said, I think 7,800 is probably the upper end of where the S&P 500 goes for now.

In rates, the 10-year fell sharply last week, which looks like a fairly normal 38.2% retracement of the big move higher. Some point to the AI trade unraveling as the reason, but the 60-day correlation between stocks and bond yields doesn’t support that. It was deeply negative into May and June, briefly strengthened in July, then quickly reversed. I think rising yields have more to do with the market pricing in higher real rates, and the 5-year, 5-year forward real yield and the 30-year yield both came down this week.

More importantly for the AI trade, the Korean won continued to strengthen this week. South Korean cumulative holdings of US stocks rose from about $185 billion in December 2024 to around $800 billion by mid-June 2026, while the won was depreciating. I think much of the summer move in semiconductors was driven by a weaker won and options speculation, and that is now unwinding.

Disclosure:

This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

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