Asset Management & Market Research

Making cents of it all - S&P 500 volatility

Volatility as measured by the CBOE Volatility Index (VIX) has been quiet, albeit for the recent spike and subsequent contraction.  Though if one looks at the VIX going back in time these minor bubble ups can tend to be precursors of bigger spikes in volatility.

In the first chart below, we examine the average daily % returns for the S&P 500 from May of 2007 to present to look at direct S&P 500 fluctuations. The darker black line on the chart represents the 5 day moving average to smooth the data.  As illustrated, the normalized daily swings for the S&P 500 since 2008 tend to be between + or – 2 %.  

That said the current pullback and subsequent snap back rally, with the exception of a few days, fell within this normalized range.   So while the tagging of the -2% band on a few occasions is a yellow light for sure, history tells us we need more – 2 % sessions occurring in close proximity to one another before we need to worry.  Thus far we have tagged the -2% zone a couple of times, but not with great frequency.

If we get another few days on the S&P 500 greater than -2% and break the uptrend band (see 2nd chart below) near 1,775, then it’s would be time to become more cautious.

 S&P 500 Index (SPX) – Daily % returns with 5 Day Moving Average

2008 to 2007 S&P avg daily returns with 5 day moving average


S&P 500 Index (SPX) with trend band


Author: Michael Needleman

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