Study: the S&P 500 has stopped moving. What this means for stocks


The U.S. stock market (S&P 500) has had a quiet 3 days. It has traded in daily range that’s less than 0.4% for 3 consecutive days.

Low volatility has returned to the stock market after the stock market went through a roller coaster from January – July 2018. Low volatility is typically a bullish sign for the stock market. That’s why traders say “never short a dull market”.
*Bear markets and big corrections are marked by high volatility and large intraday swings.
We can look at this low volatility study from 2 different angles:
What happens next when the S&P trades within a 0.4% daily range for 3 consecutive days, for the first time in 6 months
(I.e. low volatility returns to the stock market).

What happens next when the S&P trades within a 0.4% daily range for 3 consecutive days, while the S&P is within 1% of all-time highs
(I.e. low volatility while the S&P is making new highs).

Conclusion

Low volatility is a bullish sign for the stock market. When this happens, the stock market usually continues to grind higher, even if it does face a bit of short term weakness.
Click here for more market studies

Leave a Comment