There has been some attention paid to the CBOE VIX volatility index recently, after it shot up on Wednesday and Thursday to its highest level since the earthquake and tsunami struck Japan in March. The so-called fear gauge was reflecting some fears on the part of investors.

Still, some observers have been pointing out that, at a level not far above 21 on Wednesday, the VIX was actually not far above its long-term average (since 1980) of about 20. In other words, investors still look remarkably complacent in the face of stock market downturns, potential debt default in Greece, and rising concerns of an economic slowdown in the United States.

"This is a market simply unwilling to acknowledge anything unusual might be under way," said Jim Bianco of Bianco Research (via The Big Picture). "It is quite possible the latest spate of negative news is simply one in a series of crises since March 2009 that have generated a great deal of excitement and then were buried in the next rally. For more than two years, the bears have made the headlines and the bulls have made the money, much to the consternation of the bears."

Indeed, this line of thinking (buy the dip!) is what might be holding the VIX back from a true expression of concern. And Mr. Bianco argues that it would be better if the VIX actually did rise higher given the current backdrop of market volatility: "If the present complacence is incorrect, the subsequent adjustment will be harder and more violent than it would have been otherwise," he said.

John Hussman of Hussman Funds made a similar remark at the start of the week. At the time, he believed that the six-week decline of the S&P 500 was a set-up for a brief market bounce (remember Tuesday's jump?), but that investor complacency was standing in the way of anything more meaningful.

He explained that the VIX tends to spike toward 30 or higher at points where investors can reasonably be viewed as 'fearful.'"

"Likewise, though Investors Intelligence reports that the percentage of bullish investment advisors has pulled back modestly, most of them have simply gone to the "correction" camp, suggesting that the confidence in a rebound is still fairly universal. The percentage of bearish investment advisors remains way down at 22.6 per cent."

Still, complacency does appear to be melting away. In late-afternoon action on Thursday, the VIX rose another 14 per cent, to 24.4.