We've all parsed the CBOE Market Volatility Index (VIX) Spring Pop to the extreme, and I'm probably more guilty than anyone. Everyone agrees that it represents an uptick in Fear; the debate is really over whether that's bullish or bearish for the markets. I tend to view VIX as a contra tell, and side with the former. The greater the rush to buy protection, the less likely you'll actually need that protection. It almost becomes self-fulfilling.

But here's an interesting angle I hadn't thought about recently, from The Wall Street Journal:

Conventional wisdom dictates that a rising VIX means investors are getting more fearful.

But Savita Subramanian, head of U.S. equity and quantitative strategy at Bank of America Merrill Lynch, says it suggests change may be afoot in stock-market leadership, a bullish sign.

… Over the past two months, investors have favored companies with potential to raise dividends in the future over those that offer the biggest payouts now, Ms. Subramanian notes. High-dividend payers have been a hot commodity in an environment with ultralow bond yields. But concerns about the Federal Reserve trimming its monthly asset-purchase program have sent yields on benchmark 10-year Treasury bonds higher in recent weeks.

Rising rates have played havoc with the prices of bond-like stocks that offer the biggest dividends, and moving forward, Ms. Subramanian says, dividend-growth stocks "may be a better hedge against rising rates."

Also, taking the lead have been stocks most closely tied to economic growth, like technology and industrials, which have been outperforming their more defensive brethren in recent weeks.

In another reversal, stocks that tend to have smallest price moves are falling behind. That trend is clear looking at exchange-traded funds: The PowerShares S&P 500 Low Volatility ETF (SPLV) has gained just 0.8% over the past two months, well short of the 13% rise in the PowerShares S&P 500 High Beta ETF (SPHB), which is up 13%.

What goes around comes around. That SPLV rings a bell... Wait a sec, I remember now -- I discussed it back on April 30.

At the time, low-volatility stocks were in a very extended run of outperformance. I posted a chart of the ratio of the PowerShares Low Volatility Portfolio (SPLV) to the SPDR S&P 500 ETF Trust (SPY) over the prior two years and noted...

Ratios aren't exactly gospel; there's no reason a relationship like this one can't go way above or below the outer levels seen above. But having said that, you can see the outperformance in 2013 is pretty stark, and it's taken the ratio to the upper bounds of the relatively brief timeframe where we can see SPLV.

That, plus common sense says this trend is likely to end soon. If there's one thing all markets tend to do, it's rotate sectors over time. What's Hot today is likely Not tomorrow. And the trend towards low volatility is likely running on fumes.

I was right about the end of low-beta outperformance, but not so right about what exactly that meant. I added this.

The good news? It's theoretically bullish for the general market. You'd normally expect low volatility to outperform in a down market, in that it loses less. But it's outperformed in a strong market, so we've rallied with little help from the higher-beta names. Well, what happens when the baton inevitably gets passed at some point? Let's just say it's hard to imagine a downtrending market where the high-beta names are holding up the best. It's more likely the relatively few and volatile will lead a leg higher with the old and slow moving kind of flat.

So, yes, I still agree with myself. I think it's bullish if high beta does better than low beta. That really hasn't played out at all. The two years of low-beta outperformance saw a very strong market. The two months of high-beta outperformance have seen a very flat market. Go figure.

As to what it all means for volatility, I differ from Ms. Subramanian. Index volatility has two drivers. One is the volatility of the individual components of the index. If their volatility increases, index volatility clearly increases. The other driver is the correlation between the components. As correlation increases, index volatility increases. But sector rotation implies decreased index volatility. The pop in one sector is offset by a drop in another. So, if sector rotation goes full throttle, VIX should actually dip. And perhaps it soon will.

Disclaimer: The views represented on this blog are those of the individual author only, and do not necessarily represent the views of Schaeffer's Investment Research.

U.S. stocks are in the green this afternoon, as Wall Street anxiously awaits tomorrow's report from the Federal Open Market Committee (FOMC). Among the equities in focus are 3D-content development and design company 3D Systems Corporation (NYSE:DDD), medical equipment manufacturer Intuitive Surgical, Inc. (NASDAQ:ISRG), and data storage provider NetApp Inc. (NASDAQ:NTAP).

DDD enjoyed price-target hikes from BB&T Capital and Canaccord Genuity today. The respective $56 and $55 targets represent expected upside of 18.1% and 16% to the stock's current price of $47.41, and come as no surprise, considering DDD has tacked on a brow-raising 133.3% year-over-year, and has outperformed the broader S&P 500 Index (SPX) by 45.2 percentage points during the past three months. Moreover, according to DDD's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 20-day call/put volume ratio of 2.41, speculators have bought to open almost 2.5 calls for every put within the last 20 sessions. Still, short interest accounts for a whopping 27.15% of the stock's available float, meaning stock traders are overwhelmingly pessimistic toward DDD. Therefore, it is possible that call activity is heavy due to short sellers hedging their bearish bets.

Wedbush announced its price target of $580 for ISRG today, which stands as a discount to analysts' consensus target of $602.36. Moreover, the firm gave ISRG an "outperform" rating, coinciding with the 12 out of 15 analysts who endorse the stock as a "buy" or better. It seems as though analysts' expectations are a tad bit high, considering ISRG has advanced a modest 3.5% year-to-date, and currently rests at $508.01. On the other hand, sentiment in ISRG's options pits run on the bearish side. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.51 ranks higher than 99% of other such readings taken during the past year, meaning put open interest for options with a shelf-life of three months or less is at a near-annual high, outnumbering call open interest by roughly 1.5-to-1. Should ISRG continue to move sideways, potential downgrades/price-target cuts could be in store, pushing the stock south.

NTAP has been on the rise as of late, climbing almost 28% during the past year, and 15.4% within the last three months alone. Moreover, the stock reached a new 52-week high of $39.48 today, and currently stands at $39.36, roughly 2% ahead of yesterday's close. Expecting the northward trend to continue, Pacific Crest raised its price target for NTAP to $48 from $41. What's more, there could be plenty more in store for NetApp. Just 10 out of 26 analysts offer up "buy" or better endorsements, and the average 12-month price target of $41.16 is just a stone's throw from the stock's current perch. Plus, an unwinding of bearish bets in the options pits could also translate into a contrarian boon. The equity's SOIR of 0.78 ranks in the 75th percentile of its annual range, suggesting short-term speculators are more put-skewed than usual.

The Dow Jones Industrial Average (INDEXDJX:.DJI) is up 120 points, or 0.8%, to 15,299.57, as optimism runs high ahead of tomorrow's widely anticipated Federal Open Market Committee (FOMC) policy update. In terms of economic news, the Labor Department said its consumer price index (CPI) edged up by a seasonally adjusted 0.1% in May -- falling slightly short of economists' projections -- while core prices climbed 0.2%, matching consensus estimates. Elsewhere, the Commerce Department revealed that housing starts rose by 6.8% last month to a seasonally adjusted annual rate of 914,000, disappointing economists who were expecting a larger increase. Additionally, building permits fell by a smaller-than-anticipated 3.1% to a yearly pace of 974,000.

Here are a few noteworthy stats at midday:

1. The equity put/call volume ratio across all 11 options exchanges checks in at 0.76, with 3.2 million calls crossing the tape so far today, versus 2.5 million puts.
   
   
2. Among the equities with call-heavy activity is Select Comfort Corp. (NASDAQ:SCSS), which has tacked on about 0.7% since the opening bell. Currently, calls account for 98.9% of the bed manufacturer's intraday option volume. At last check, SCSS was trading at $25.52.
   
   
3. The Nasdaq shows an advance/decline ratio of 1.95, with the number of upward movers outpacing the decliners by a margin of nearly 2-to-1.
   
   
4. Among the Nasdaq's major advancers is SolarCity Corp (NASDAQ:SCTY), which has gained about 3% in intraday action, after announcing plans to sell $175 million of its convertible senior notes. SCTY is presently trading at $37.05.
   
   
5. The CBOE Volatility Index (VIX) is 0.1 point, or 0.8%, lower, to rest at 16.67.
   
   
6. The put/call volume ratio on the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) -- which is currently hovering at 20.16 -- stands at 2.26, with puts more than doubling calls.

View a real-time chart of the Dow Jones Industrial Average 2 Minute (INDEXDJX:.DJI).

Analysts are weighing in today on banking concern Fifth Third Bancorp (NASDAQ:FITB), wireless services provider T-Mobile US, Inc. (NYSE:TMUS), and financial firm Comerica Incorporated (NYSE:CMA). Here's a quick roundup of today's bearish brokerage notes.

• FITB -- which has advanced more than 41% on a year-over-year basis to linger in the $18.29 neighborhood -- was downgraded to "underperform" from "market perform" at Wells Fargo ahead of the opening bell. This skepticism toward Fifth Third Bancorp isn't limited to the brokerage bunch, though. In fact, short interest ramped up by a whopping 128% during the past two reporting periods, and now these bearish bets make up a healthy 4.6% of the security's available float. It would take nearly a week to unwind these shorted shares, at the stock's average pace of trading -- pointing to an ample amount of sideline cash.
  
  
• Despite receiving some upbeat analyst attention yesterday, TMUS was started at Canaccord Genuity with a tepid "hold" rating and a price target of $22 today, the latter of which denotes a slight discount to yesterday's closing price of $22.32. Meanwhile, T-Mobile US, Inc. -- which has surged more than 93% during the past year -- sports a Schaeffer's put/call open interest ratio (SOIR) of 0.19, with short-term calls outstripping puts by more than 5-to-1. This ratio is docked in the 4th annual percentile, signaling near-term traders have rarely been more bullishly biased toward the stock during the last 12 months.
  
  
• Although CMA has climbed nearly 24% so far this year to trade at $37.59, analysts at Wells Fargo downgraded the stock to "underperform" from "market perform" in pre-trading activity. This downbeat attitude is prevalent in the options pits, as well. Comerica Incorporated's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio stands at 4.14, confirming traders have bought to open more than four puts for every call over the last two weeks. This ratio arrives in the 89th percentile of its annual range, reflecting a stronger-than-typical penchant for puts over calls.

U.S. equities are poised to continue Monday's positive price action, with futures pointed modestly higher this morning. A round of domestic economic data will give traders something to chew on throughout the session; however, most of the day's chatter should revolve around the Federal Reserve, with the central bank slated to kick-off its two-day meeting later today.

In company news, here are some stocks to watch today:

• Sprint Nextel Corporation (NYSE:S) is suing DISH Network Corp (NASDAQ:DISH) and Clearwire Corporation (NASDAQ:CLWR) in an attempt to halt their impending merger. Sprint, which owns a majority stake in Clearwire, claims DISH's bid is against corporate law in Delaware, where Clearwire is incorporated, and that the takeover cannot be completed without approval from at least three-quarters of Clearwire's voting security holders. Just last week, CLWR's board endorsed DISH's takeover bid over a rival offer from S. (MarketWatch)


• Over the past six months, Yahoo! Inc. (NASDAQ:YHOO) claims it has received 12,000 to 13,000 data requests from various U.S. law enforcement agencies. According to a company statement posted on YHOO's recent acquisition, Tumblr, the majority of the inquiries pertained to domestic crimes, such as fraud and homicide -- although some fell under the U.S. Foreign Intelligence Surveillance Act, as well. (Reuters)


• BlueRun Ventures, which owned a 15% stake in Waze Inc. as the company's largest investor, produced a 19-fold return on its $8.7 million investment, thanks to Google Inc's (NASDAQ:GOOG) $1.1 billion acquisition of the social mapping application. BlueRun's last investment to top the $1 billion mark? PayPal, Inc., which eBay Inc (NASDAQ:EBAY) bought out in 2002. (Bloomberg)


• Daniel Loeb's Third Point LLC has upped its stake in Sony Corporation (ADR) (NYSE:SNE) by 5 million shares, according to a letter sent from Loeb to Sony CEO Kazuo Hirai. The hedge-fund investor now owns a total of 70 million shares, which is valued at approximately $1.4 billion and amounts to 6.9% of the Japanese company. The letter also urged Hirai to sell of 15% to 20% of its entertainment arm to improve SNE's share price. (The Wall Street Journal - subscription required)


• Corning Incorporated (NYSE:GLW) recently gave startup glass manufacturer View, Inc. a large endorsement to continue creating its "dynamic glass," which can adjust its tint to the surrounding brightness automatically or wirelessly through an app. View claims the glass, which is being used for entire walls of buildings, can reduce annual energy consumption by 20% and HVAC peak load by 25%. (AllThingsD)


• Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk wants to bypass franchised automobile dealers, in an effort to sell his $70,000 electric luxury vehicles directly to customers. States such as Texas, Virginia and North Carolina, are working to prevent Musk from doing so, stating that his actions violate state franchise laws. (Yahoo! Finance)


• One Million Moms is boycotting Kraft Foods Group Inc's (NASDAQ:KRFT) "Let's Get Zesty" campaign, claiming its advertisement for Zesty Italian salad dressing is "disgusting" and obscene. The ad, which launched in early April, features a naked model, Anderson Davis, lying on a picnic blanket that barely covers his private parts. (Adweek)