Is that it?

That's the question they're asking in the bond and stock markets today. Several bond deals went through today ... the Dow soared as much as 190 points at one point ... the Japanese yen sold off ... and the credit default swaps market calmed down. It's like the "Armageddon" scenario has been dead and buried -- in just three trading days!! Talk about a bipolar market.

My guidepost to the state of the markets is going to be the CBOE OEX Volatility Index, or VXO. This chart shows the big volatility spike of a few days ago, followed by the relaxation this week. That reflects the ebbing of market fear. But I want you to notice something in the chart -- we "gapped" higher on 7/26 and as of today, have come down to fill that gap.

If ... IF ... the worst is NOT over, the VXO will hold here and turn back up. That's what happened after the February sell-off. If there's another severe leg down in the credit markets, then the VXO will likely surpass its high (around the 27 level). We'll see what happens. But you can put me in the "worst is not over" camp.