Comparing and Charting SP500 Volatility since Bear Market Bottom

Oct 15, 2014: 2:38 PM CST

How does current market volatility – which is surging – compare to the two prior post-stimulus (QE) sell-offs that occurred since the 2009 Bear Market Bottom?

Let’s take a look at where we are and what may be in store if history is a guide:

The chart above shows the S&P 500 index compared with Volatility.

I’m defining “Volatility” as the Intraday Range which is measured by the intraday High minus the Low.

The red histogram shows each day’s range (high minus low).

The black line is simply the 21 day (roughly one month) average of the Intraday Range.

Not counting the 2009 Bear Market Reversal low, there were two periods of high volatility which I’ve highlighted:

  • The Mid-2010 period which was just after the Federal Reserve ended its initial QE1 program (and the “Flash Crash” occurred)
  • The Mid-2011 period which was also after the end of the Fed’s QE2 program which concurred with the European Debt Crisis and the US Debt Ceiling debacle.

We’re now seeing the third round of the QE3 market-manipulative stimulus terminate and stock market prices once again are showing high volatility in patterns that may be very similar to the end of QE1 and QE2.

Specifically, during the two prior periods, intraday range peaked above 60 points; today’s session saw a high peak of 53 points in the S&P 500.

We can look closer at the average to get a sense of the pattern of volatility and what may be in store now:

The chart above simply highlights or zooms-in on the Intraday Range (red) and the 21-day average (black line).

After QE1 in 2010, the 21-day average peaked near 35 points.

Volatility was higher during the 2011 global news (and end of QE2) where the 21-day average intraday range peaked above 40 points.

At the moment – at the end of QE3 and with additional bearish global headlines developing – we’re seeing the black line rise sharply to its current values above 25 points.

That’s the first time we’ve seen the average this high since the declination period at the end of 2011.

I’ll keep posting updates should stock prices continue to trade lower and we’ll compare this new state of market volatility (not seen since 2011) with prior events.

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Corey Rosenbloom, CMT
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1 Comment

One Response to “Comparing and Charting SP500 Volatility since Bear Market Bottom”

  1. Updating the Best and Worst Days of 2014 for the SP500 | Afraid to Blog Says:

    […] Volatility tends to “cluster” or appear together – rarely do we see random days of high volatility without other days around it of volatility. […]