Calm Before The Storm? Volatility Hits Seven-Year Low

wall-street-etfChris Preston: All is quiet on Wall Street right now. Too quiet.

Stocks have scarcely budged in the last four trading days, a product of historically low volatility.

The S&P 500 is down seven points, or a mere 0.33%, since last Thursday.

Volatility, as measured by the VIX, is just off its lowest point since 2007.

Year-to-date, the volatility index has fallen 20%. The last time the VIX was this low, it doubled within six months.

Of course, those were different times. In 2007, we were on the cusp of a global recession.

Fortunately, another recession does not appear imminent.

The tight trading range could be more of a concern than the historically low volatility.

Friday and Monday were two of the four least volatile trading sessions of the last 20 years, with intraday trading ranges of 0.25%.

It had been 1,787 days, or seven years, since such a narrow intraday range had occurred.

Now it’s happened twice in the last week.

Meanwhile, it has been 46 days since the S&P 500 has budged as much as 1%, the longest streak since 2006.

When stocks trade in a narrow range for an extended period, a huge breakout usually follows.


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