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S&P 500: Most Boring Six Days in 23 Years

In the last six days the S&P 500 has remained within a tight range. A similar volatility crash occurred 23 years ago and was followed by year-long directionless market.

The volatility crash in S&P in the last six days is shown in the chart below.

The change from highest high to lowest low of this 6-day tight range is only 0.7144%.

Below is a chart that shows the 6-day range since 1965.

The current value of 0.7144% is very low. The lowest value since 1965 was observed January 21, 1994 at 0.7094%. Then, prices remained flat for the whole year before the bull market started in 1995.

Therefore, we already have empirical evidence that the S&P 500 can move sideways in a tight range for an extended period of time. No one knows if this will happen because a forecast of this kind is impossible but the unprecedented popularity of short volatility strategies via ETFs could also contribute to a tight range due to a long indecision period. The losers will be trend-followers and long volatility traders. There is enough money in the trend-following crowded trade to finance short volatility trades. Actually, every time a long indecision period occurred in the past, a wealth-transfer was the net effect.

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Charting and backtesting program: Amibroker


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