The S&P 500 Index (SPX) continues to trade in a narrow
range, ever since a brief upside breakout after the first
Since then — for the last 12 trading days — SPX has been in a
very tight range, between 2380 and 2400. On almost every day
the daily range has been 10 SPX points or fewer. This tight
action has forced realized (historical) volatility down to
extremely low levels. The 10-day historical volatility of SPX
is a paltry 2.7%. Even the 100-day historical volatility is
only 7%. These are levels rarely seen.
While this may be a warning sign of sorts (a warning of
complacency), history has shown that volatility can remain low
for long periods of time, before eventually resulting in a
sharp, but perhaps short-lived market correction.
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