S&P 500 Analysis: Is the Rare Streak of Low SPX Volatility Ending?

If the US stock market has seemed quiet (“…a little too quiet”) of late to you, that’s because it has been.

No matter how you measure it, volatility in the S&P 500 has been near historically low levels:

• The VIX is sporting a 12 handle, near the lowest levels that we’ve seen since early 2018
• 30-day realized volatility (RVOL) in the index fell below 6 yesterday, its lowest reading since 2019
• It’s been 6 weeks since the S&P 500 fell by more than -0.41% (prior to today)

The last bullet may seem somewhat arbitrary – and it absolutely is – but that is the statistic that stands out the most to me. Historically, the index has fallen by -0.41% or more roughly 26% of all days, so a 30-day streak without even that minor of a daily dip is notable indeed.

In fact, since the mid-1960s – over nearly 60 years! – we’ve only seen three such unique 30-day streaks without a -0.41% down day!

Source: StoneX

As the chart above shows, the two most recent streaks were in late-2017 and late-2019 and preceded notable drops in the index by a few months, but the 1993 occurrence took place in the early stages of the 1990s bull market, so it’s difficult to glean a strong market signal from the small sample of past placid periods.

In the coming days, I’ll aim to analyze (the end of?) this streak of low volatility from several different perspectives and explore what that may mean for future returns, but for now, the takeaway is that US stocks have been historically quiet, and given that volatility has a tendency to be cyclical, we could see an outbreak of larger moves in the near future.

S&P 500 Technical Analysis – SPX Daily Chart

Source: TradingView, StoneX

Of course, just as we explain how quiet the market has been, this morning’s cooler-than-expected CPI report has sparked a big selloff in the large-cap stocks that make up the S&P 500. The index is trading down -0.75% as we go to press, threatening to end the streak, though from a purely technical perspective, the S&P 500 uptrend remains intact. If we do see follow-through to the downside, the key level of support to watch will be 5,500, where the bullish trend line off the April lows, 21-day EMA, and previous-resistance-turned-support converge. Only a break below that level would shift the near-term bullish bias to neutral.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX