The Cboe Volatility Index is a guide to human nature, says a prominent Wall Street bull. And that guide indicates the lows are in for the stock market and that new highs may be no more than months away. Canaccord Genuity analyst Tony Dwyer has characterized the stock market’s early February plunge as a phenomenon known as a “shock drop,” in which a correction is sharp enough to cause the 10-week rate of change in the Cboe Volatility Index VIX, -1.05% or VIX, to spike to 125. The rate of change, or ROC, measures the percent change in price from one period to the next. Stocks plunged in early February, with the S&P 500 SPX, +1.07% and Dow Jones Industrial Average DJIA, +0.87% falling more than 10% from all-time highs set in late January, meeting the widely used definition of a correction, as the VIX spiked. Stocks subsequently traded sideways, with the S&P 500 temporarily trading below its 200-day moving average in early April and coming within a whisker of retesting February low before bouncing back toward the middle of its recent trading range. Stocks continued their rebound Tuesday, leaving the S&P around 5.8% off its all-time high, while the Dow stands 6.9% below its record. The VIX itself, which uses S&P 500 options to measure trader expectations for volatility over the coming 30-day period and is often referred to as a guide to the level of investor fear, has declined after spiking above 50 amid the initial selloff—a move exacerbated by the implosion of trading products that facilitated bets that volatility would remain subdued. The VIX was trading Tuesday at 15.58, back below its long-term average of around 20. The VIX 10-week ROC, meanwhile, has dipped below zero. Dwyer observed in February that shock drops typically see stocks bounce and then retest the low as volatility begins to decline before moving on to new highs. In a Monday note, Dwyer said he saw no reason to change “what worked so well in analyzing a human-nature-driven ‘shock drop.” He elaborates: Stocks appear to be following the script, he said (see chart below). Canaccord via