The stock market's volatility indicator is signaling a trough in the S&P 500

• The stock market's volatility gauge is signaling a trough in the S&P 500.
• Futures for the CBOE Volatility Index indicated more uncertainty about the near term than longer term.

The CBOE Volatility Index is one of the market's favorite fear gauges, and it's flashing an unusual sign that may indicate a low point in stocks.

Futures contracts tied to the volatility index, also known as the VIX, track the expected amount of market volatility down the line.

Normally, the futures curve slopes upwards, reflecting more uncertainty about the short term than in the longer term.

But it turned upside down on Thursday.

That's when second-month futures flipped below the front-month, according to data compiled by Bloomberg. And such so-called backwardation is typically associated with a trough in the S&P 500.

It speaks to more anxiety about where the stock market is headed amid recession angst, the bond market rout, and mushrooming geopolitical risk.

But contrarian investors could also view it as a sign the market has gotten so bad that stocks may have finally hit rock bottom, which they would see as an opportunity to buy.

In September, the volatility index was trading at post-pandemic lows, signalling a strong bull market and fizzling recession fears.

But in the past couple weeks, a surprise attack by Hamas on Israel, a still hawkish Fed, and relentless volatility in bonds has infused the market with fresh uncertainty.

In a note issued on Thursday, Apollo chief economist Torsten Sløk wrote that credit volatility has increased recently and remains above pre-pandemic levels.