Expect Volatility To Come Back With Vengeance – Part II

Expect Volatility To Come Back With Vengeance – Part II
December 09 17:51 2018


Three months ago I talked about volatility was bound to come back,

Expect Volatility To Come Back With Vengeance

In 2017, S&P 500 had only six 1% moves in a day. So far in 2018, we have seen the S&P 500 move more than 1% in a day, 16 times down and more than 1% in a day up, 20 times up. Since 2007 and pre-2017, the S&P 500 has had 1% daily moves on average 77 times per year.

Another way to look at volatility is to look at the intraday daily range which is the high minus low, divided by the prior day’s close. The average daily range in 2017 was 0.6%. This is less than half the pre-2017 average of 1.3%.

When I look at the VIX on a weekly chart, what I’m seeing is volatility broke the down trendline, which is now acting as support.


Well, three months later, volatility has come back with VENGEANCE.

  • S&P 500 has closed up or down more than 2% on 15 trading days this year, the most swings of that size since 2011.
  • Dow has closed up or down at least 500 points 38 times, 12 of those times coming in 2018.
  • Two weeks ago, the S&P 500 had its biggest weekly gain since 2011.  This past week the S&P 500 had its biggest weekly decline since March.
  • The Dow has move 800 points in a single day six times…4 of those times coming in 2018.
  • S&P 500 just put together its worst week in December since 1987.

This past week, we saw the arrest in Canada of Huawei CFO Meng Wanzhou.  Meng is the daughter of one of founders of Huawei, the Apple of China.  So, although there is a 90 day truce in the US-China trade war, things may get worse before they get better.

The spread between two-year and 10-year Treasury yields continues to narrow to levels unseen since just before the Great Recession.

Economic and company profit growth are projected to slow in 2019…I believe we will be in a recession in April 2020.

Thus, Volatility is back with Vengeance and it’s here to stay.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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About Article Author


I'm a retail investor like most of you and learning everyday, but I have been educated and trained to identified the Smart Money on the charts to pick up whatever crumbs they leave behind.

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