{"id":9493,"date":"2018-04-27T07:30:57","date_gmt":"2018-04-27T11:30:57","guid":{"rendered":""},"modified":"2018-04-27T07:30:57","modified_gmt":"2018-04-27T11:30:57","slug":"high-volatility-is-here-to-stay","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/high-volatility-is-here-to-stay\/","title":{"rendered":"High Volatility Is Here to Stay"},"content":{"rendered":"

If you fell asleep two weeks ago, and then just woke up this morning, you wouldn’t notice much of a difference in the broad stock market.<\/p>\n

The S&P 500 started the morning of April 13 at about 2670. The index closed just under that level yesterday. So, there hasn’t been much movement.<\/p>\n

But there has been a whole bunch of volatility.<\/p>\n

Over the past two weeks, the S&P 500 has traded as high as 2717, and as low as 2612. That’s a 105-point trading range – or 4% – in just two weeks.<\/p>\n

Let that sink in for a minute. What a difference between this year and last year.<\/p>\n

In 2017, the market suffered from record-low volatility. I can’t count the number of times I commented on the ridiculously small daily trading ranges in the S&P 500. In a market with millions of participants, and trillions of dollars at work, it seemed outrageous – to me at least – that the average intraday move in the stock market was less than 0.4%.<\/p>\n

Of course, that’s certainly not the case so far in 2018. Ever since the market peaked in January, we’ve seen huge intraday moves in the S&P 500. It’s not uncommon anymore to see swings of more than 2% between the daily highs and lows.<\/p>\n

That’s a dramatic increase in volatility. And it’s here to stay for a while.<\/p>\n

As I reminded traders in my very first essay of 2018<\/a>… low levels of volatility are always followed by higher levels of volatility. We had low volatility for almost all of 2017. So, I expect we’ll see high volatility for almost all of this year.<\/p>\n

Take a look at this long-term chart of the Volatility Index (VIX)<\/a> from way back, starting in 2005…<\/p>\n

\"\"<\/p>\n

From 2005 through about mid-2007, the VIX traded at low levels – between about 10 and 16. Yes, there were a couple of times in that period when the VIX spiked sharply higher. But it was temporary. The VIX quickly fell back into its depressed range.<\/p>\n

Notice, though, that starting in mid-2007, the VIX spiked higher, and it sustained that higher level for the next two and a half years.<\/p>\n

In other words, the period of low volatility that lasted for two and a half years from 2005 until mid-2007… was followed by a period of high volatility that also<\/em> lasted for two and a half years.<\/p>\n

Here’s a more recent chart of the VIX…<\/p>\n

\"\"<\/p>\n

The VIX spent 14 months trading in a depressed range between 9 and 16. In February, the VIX spiked sharply higher, and it has sustained a higher level. This new period of higher volatility ought to last at least as long as the previous period of low volatility.<\/p>\n

So, get used to larger moves in the stock market. This condition is going to last for a while.<\/p>\n

Best regards and good trading,<\/p>\n

<\/p>\n

Jeff Clark<\/p>\n

Reader Mailbag<\/strong><\/h2>\n

Today, some responses to yesterday’s essay on natural gas<\/a>…<\/p>\n

\n

Thanks for the tip! May get into natural gas. <\/p>\n

– Nancy<\/strong><\/p>\n<\/blockquote>\n

<\/p>\n

\n

Thanks, diesel. Interesting read. Natural gas prices couldn\u2019t get much cheaper, and this move does buck the trend according to the chart. The question is play options or the commodity itself?<\/p>\n

Individual companies probably won\u2019t move much, but their stock prices are near their historical lows, so probably a good long-term buy anyway. I think it\u2019s the only industry sector in the market with such low multiples, as the rest of the market sectors are basically expensive, and closer to their yearly high prices.<\/p>\n

– Ernest<\/strong><\/p>\n<\/blockquote>\n

And a note on a recent Delta Report<\/em> recommendation…<\/p>\n

\n

Jeff, based on your XOM recommendation, I bought the calls, and wow did I do well. My only problem – I exited too early with “only” a 100% gain. I did the same with Kinder Morgan and XLE. Thanks Jeff!<\/p>\n

– James<\/strong><\/p>\n<\/blockquote>\n","protected":false},"excerpt":{"rendered":"

And it’s going to last for a while…<\/p>\n","protected":false},"author":34,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-9493","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_content_changed_during_generation":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/9493","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/34"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=9493"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/9493\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=9493"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=9493"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=9493"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=9493"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=9493"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=9493"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=9493"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}