The stock market’s so-called fear gauge shot up by nearly 10% Thursday as equities traded lower before Federal Reserve Chairman Ben Bernanke’s highly anticipated speech in Jackson Hole.

Volatility-linked exchange traded funds tracked the CBOE Volatility Index higher. These products, which include iPath S&P 500 VIX Short-Term Futures ETN (NYSEArca: VXX) and VelocityShares Daily 2X VIX Short-Term ETN (NYSEArca: TVIX), follow VIX futures rather than the spot price. The VIX tends to rise when stocks tank.

The two exchange traded notes climbed Thursday morning while stocks pulled back on worries Bernanke may not announce additional stimulus for the economy, while European markets were also shaky.

However, the volatility ETNs have seen outflows this week as they pull back from their recent highs. [VIX ETFs Broadcast Lingering Market Volatility]

The VIX and related ETFs “have been active as expected recently, and the flows have mostly involved profit taking in VXX  calls as well as VIX options themselves,” says Paul Weisbruch, vice president of ETF/options sales and trading at Street One Financial.

“We note that the VIX has pulled back notably from its 48 high in early August and closed with a 35 handle yesterday,” he wrote in a note Thursday. “In related activity, we point out that TVIX has experienced massive outflows this week (in the neighborhood of about 60% of the fund’s total assets under management), as has VXX, as a further indication of profit taking on long ‘volatility’ positions.”

CBOE Volatility Index

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.