Here’s one reason Wall Street’s ‘fear gauge’ didn’t explode amid the stock market’s recent skid

Stocks are in a phase of apparent recovery after a tariff-sparked selloff threatened to put a lasting end to the bull run for U.S. equity markets.

The downdraft — which commenced on the heels of fresh presidential threats for increased tariffs, promising reinvigorated U.S.-China trade aggressions — has raised as many questions about the resiliency of the uptrend for stocks, as has the ability of a closely watched volatility gauge to pivot from flashing red to signaling relative calm.

The Cboe Volatility Index VIX, -7.00%  touched an intraday high at 23.38 on May 9, representing a more than 80% surge from its comparatively recent intraday nadir of 12.80 put in on May 3, according to FactSet data.

However, the gauge, which maintains a historical average of between 19 and 20, is currently hanging around 15.50, as of Thursday trade.

Read: The woman who nailed the 2018 stock-market volatility blowup has kicked off an actively managed ETF

In other words, rather than continuing to surge, the index — known by its ticker, VIX — has receded, with the Dow Jones Industrial Average DJIA, +0.84% , S&P 500 index SPX, +0.89% and the Nasdaq Composite Index COMP, +0.97%  rebounding from their recent declines.

JPMorgan Chase & Co. analysts Marko Kolanovic and Bram Kaplan, in a recent note, have some theories as to why the VIX, which reflects S&P 500 options bets for the coming 30 days, has seen relatively muted action amid the geopolitical turmoil.

The analysts said that since May 5, when President Donald Trump issued a tweet signaling a reignition of Sino-American trade tensions, investors pulled over $300 million from unlevered long VIX products, and over $450 million from levered products, including the ProShares Ultra VIX Short-Term Futures ETF UVXY, -6.09% .

The analysts explain the result of those moves

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