Self Directed Investor Inc
SDI: "Empowering investors with ideas and education"
Symbol Lookup »  
Topics:ChinaETFsEarningsEconomyEnergyForexGoldIncomeLessonsIdeasTrading

  • Other news: News from PR Newswire
| More

Comparing Daily Range Volatility in SP500 and Dow Jones

Wed, Feb 22, 11:31 AM ET, by Corey Rosenbloom

While there are plenty of methods to assess the volatility environment of a market, one of the simplest tactics is to measure the daily range.

Let’s take a look at the pure daily range of the S&P 500 and Dow Jones index through major up and down periods over the last few years.

Here’s the S&P 500:

Click for full-size image.

The custom indicator at the bottom subtracts the low of the day from the high of the day, which gives us the point spread or range of the day.

For example, if the S&P 500 opened at 1,000 which was the low of the session and formed a high of the day at 1,010, then the daily range would be 10 points.

This time of simple calculation does not take into account the open or close (unless those values happened to be the absolute high or low of the session) and does not count any gaps in its calculation.

What can we learn from a chart like this and why is it important?

First, volatility – or range – tends to cycle from periods of high volatility to low volatility.

Stated differently, periods of low volatility often break into periods of high volatility, and vice-versa.

Second, there’s a strong correlation between periods of high volatility (large daily range) and declines in the market – such as the periods I’ve highlighted above.

The opposite is also true – periods of low volatility tend to be correlated with steady or lengthy rises in the market.

There’s something to be said about that – we tend to be confident and calm during periods of bullish rallies and then panic or get emotional during periods of sharp decline.

This sort of psychology reveals itself in part via the daily range (or other volatility measures).

Third, we can see periods during a “market collapse” where volatility increases very sharply, and then steadily declines as price forms a base and begins to rally.

The two recent examples are the “Flash Crash” of May 2010 and the “August Collapse” of 2011.

Both cases began with an initial price plunge (surge in volatility) and then ended with a basing or consolidation period as prices stabilized before resuming the dominant uptrends.

For reference, over the last three years, a daily range of 30 points in the S&P 500 has been the dividing line between abnormally high volatility in the context of a market decline and otherwise stable rising trends.

During the recent rise period in 2012, the daily S&P 500 range has been under 20 points per day, with some days registering under 10 points.

That clues us in that a cycle of high volatility could be developing in the future.

The picture is similar – and of course point values different – in the Dow Jones Index:

We see the same initial spikes in Daily Range which then give way to reduced range as price stabilizes after an initial surge in volatility (and ‘collapse’ in price).

The level that divides high volatility daily range from low volatility range in the Dow seems to be around 200 to 300 points.

During 2012, the Dow has consistently registered near or under 100 points per day for a high to low range.

Take a further look at these charts and the cycles of volatility in terms of the index daily range values and feel free to share additional insights you find.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey's new book The Complete Trading Course (Wiley Finance) is now available!

blog.afraidtotrade.com


SDI Glossary: "price" Definition
SDI Glossary: "Finance" Definition
This Article's Word Cloud:   Corey   During   Jones   This   absolute   adsbygoogle   afraidtotrade   been   between   calculation   calm   collapse   cycle   daily   decline   declines   does   during   formed   from   give   high   index   initial   into   last   look   market   over   period   periods   point   points   price   range   recent   session   surge   take   tend   that   then   there   these   under   values   volatility   which   with   years

| More

PreFed Price Level Planning on SP500 Dow and NASDAQ
Wed, Jul 29, 3:31 PM ET, by Corey Rosenbloom

As we head into today’s Federal Reserve announcement, let’s quickly update our key levels on ...

July 27 More Selling Market Update and Big Stock Scan
Mon, Jul 27, 3:51 PM ET, by Corey Rosenbloom

Stocks continued their sell-off toward lower support targets, and that’s where we begin today’s update. ...

Traders Should Watch this Level in Netflix NFLX
Mon, Jul 27, 11:51 AM ET, by Corey Rosenbloom

After a price surge and gap higher, Netflix (NFLX) shares are retracing in an ongoing ...

Simple Support and Resistance Grid for MannKind MNKD
Fri, Jul 24, 3:21 PM ET, by Corey Rosenbloom

A couple readers have asked me to chart MannKind (MNKD) – a low priced but ...

July 24 High Activity Market Update and Stock Scan
Fri, Jul 24, 2:51 PM ET, by Corey Rosenbloom

With many stocks gapping, gold surging, and stock plunging, there’s a lot to cover in ...

July 23 Selling Market Update and Big Stock Scan
Thu, Jul 23, 3:51 PM ET, by Corey Rosenbloom

After a small morning bounce off support, stocks continued falling along the sell pathway from ...

July 22 Market Update AAPL Gap and Daily Stock Scan
Wed, Jul 22, 3:11 PM ET, by Corey Rosenbloom

So far, we’re seeing a repeat of yesterday’s morning weakness, afternoon stability, and rally into ...

July 21 Stock Scan and Sell Swing Market Update
Tue, Jul 21, 2:51 PM ET, by Corey Rosenbloom

The logical and expected sell-swing (retracement) developed against a background of resistance and divergences. However, ...

Finally a Pullback - Charting ES and YM Stock Futures
Tue, Jul 21, 11:41 AM ET, by Corey Rosenbloom

Is this the pullback we’ve been waiting for? Let’s do a quick morning update of ...

July 20 Bull Market Continues Market Update and Stock Scan
Mon, Jul 20, 3:11 PM ET, by Corey Rosenbloom

The short-squeeze and bullish price surge continues in the stock market at the same time ...

Bear Trap Trigger Puts Price on Path to All Time Highs for Apple AAPL
Mon, Jul 20, 11:41 AM ET, by Corey Rosenbloom

After springing a Bear Trap, Apple (AAPL) shares pivoted and trapped the short-sellers, placing price ...

July 17 Flat Market Update and Big Mover Stock Scan
Fri, Jul 17, 3:11 PM ET, by Corey Rosenbloom

Despite the strength of technology leaders Google and Facebook (among others), the S&P 500 is ...

To See a Bear Market, Look to Gold Not Stocks
Fri, Jul 17, 2:41 PM ET, by Corey Rosenbloom

Gold prices slid to new lows today in an ongoing downtrend and bearish money flow. ...

Quad Market Money Flow Grid for Oil Gold Dollar and Stocks July 16
Thu, Jul 16, 3:41 PM ET, by Corey Rosenbloom

Let’s take a moment to update our mid-month Money Flow Grid for our four main ...

Relief Rally Continues Market Update and Stock Scan July 16
Thu, Jul 16, 1:41 PM ET, by Corey Rosenbloom

The Relief Rally in stocks continued without ceasing today, taking the index shy of another ...

A Takeoff and Bounce Reversal for Delta Airlines DAL
Wed, Jul 15, 2:31 PM ET, by Corey Rosenbloom

Recently we’ve been discussing the “Arc Trendline” Pattern in high-flying Delta Airlines (and similar companies) ...

Join Dave Landry for "This Week in the Charts" Update Thursday
Wed, Jul 15, 2:11 PM ET, by Corey Rosenbloom

I’m excited to highlight my long-time colleague Dave Landry’s upcoming market update and wanted to ...

Surge into Breakout for Google GOOGL
Tue, Jul 14, 2:11 PM ET, by Corey Rosenbloom

Google (GOOGL) now joins a list of “Strong Getting Stronger” stocks in breakout mode. Yesterday ...

Another Amazon AMZN Breakout to New Highs
Mon, Jul 13, 12:11 PM ET, by Corey Rosenbloom

While scanning the 41 stocks in the S&P 500 that are making fresh new 52-week ...

Seizing Opportunity From Stock Market Volatility (Guest Columnist at Barron's)
Sun, Jul 12, 8:11 AM ET, by Bill Luby

Steve Sears and I have a running joke that whenever I am tapped as a ...

Apple AAPL Breaking Down with New Price Level Planning
Thu, Jul 9, 1:41 PM ET, by Corey Rosenbloom

Despite the broader market bounce today, Apple (AAPL) shares broke one key support level and ...

The SP500 and the 200 day SMA Battle
Wed, Jul 8, 11:51 AM ET, by Corey Rosenbloom

We once again find the S&P 500 fiercely challenging the rising 200 day Simple Moving ...

Three Strong Stocks Powering to All Time Highs July 8
Wed, Jul 8, 8:11 AM ET, by Corey Rosenbloom

During yesterday’s reversal rally, 17 stocks in the S&P 500 made fresh new 52-week highs ...

July 7 Bear Trap Reversal Market Update and Stock Scan
Tue, Jul 7, 4:21 PM ET, by Corey Rosenbloom

Buyers won’t let the market roll-over, as proven with today’s power-buy rally off a support ...

Is a Bullish Reversal Brewing for Bond Fund TLT
Mon, Jul 6, 2:31 PM ET, by Corey Rosenbloom

With stocks testing support and threatening a possible breakdown (reversal), US Treasury prices (measured by ...

Weekly Bow Tie Ribbon forming on Apple AAPL Sigma Chart
Mon, Jul 6, 1:31 PM ET, by Corey Rosenbloom

An update to our Weekly (and Daily) Sigma Band Chart of Apple (AAPL) reveals another ...

Rocket Arc Pattern Completing in FXI China While We Focus on Greece
Mon, Jul 6, 12:11 PM ET, by Corey Rosenbloom

You’re missing breaking news and a “Rocket Arc” Pattern collapsing price to support in China ...

"Filling Five Gaps in Your Trading" Webinar Recording
Fri, Jul 3, 2:11 PM ET, by Corey Rosenbloom

Are you not achieving the trading goals or financial goals you’re hoping to see with ...

Updating Sigma Band Volatility Chart of the SP500
Fri, Jul 3, 12:21 PM ET, by Corey Rosenbloom

As we cruise into the Fourth of July holiday weekend, let’s take a moment to ...

Pondering the Current Pivot Point in the SP500
Thu, Jul 2, 3:11 PM ET, by Corey Rosenbloom

On what level should we be focusing right now in the S&P 500? Let’s zoom-in ...

July 2 Midday Market Update and Stock Scan of the Day
Thu, Jul 2, 2:41 PM ET, by Corey Rosenbloom

Price traded in a similar pattern to what we saw yesterday, starting strong but weakening ...

First of July Market Update and Trending Stock Scan
Wed, Jul 1, 2:51 PM ET, by Corey Rosenbloom

And so begins Quarter 3 2015! The reversal continued yet price struggled mid-day in a ...

Four Stocks in the Dow Making Fresh 52 Week Lows
Wed, Jul 1, 12:11 PM ET, by Corey Rosenbloom

“What gets weak tends to get weaker; what gets strong tends to get stronger.” Which ...

Power Bounce Market Update and June 30 Stock Scan
Tue, Jun 30, 3:11 PM ET, by Corey Rosenbloom

What goes down must come up… right? After an initial bounce in the morning, price ...

Three Rocket Arc Patterns for Overseas ETFs EWG EWS and FXI
Tue, Jun 30, 11:21 AM ET, by Corey Rosenbloom

When doing ETF scans, I came across three “Rocket Arc” Patterns I wanted to share ...

Join Corey and Manesh Patel Tuesday June 30 for "Planning Trades for the Summer" Webinar
Tue, Jun 30, 9:51 AM ET, by Corey Rosenbloom

As we end the second quarter 2015 (can you believe it?), what opportunities are setting ...

Today's 34% VIX Spike and What to Expect Going Forward
Mon, Jun 29, 9:41 PM ET, by Bill Luby

One of the top posts of 2013 was All-Time VIX Spike #11 (and a treasure ...

Longest SPX Peak to Trough Pullback Since 2012
Mon, Jun 29, 8:11 PM ET, by Bill Luby

I have been quiet in this space as of late, but there is nothing like ...

June 29 Greece Market Update and Falling Stock Scan
Mon, Jun 29, 2:31 PM ET, by Corey Rosenbloom

Markets got a rough start to the week with a gap-down and trend day lower ...

Quick Quad-Market Reaction Grid to Start the Week
Mon, Jun 29, 11:31 AM ET, by Corey Rosenbloom

With bearish news about Greece hitting the markets this weekend, money flow quickly shifted in ...

SP500 Continues to Respect the Rangeā€¦ For Now
Mon, Jun 29, 10:41 AM ET, by Corey Rosenbloom

With fears increasing that “all may not go well” with Greece over the weekend, markets ...

June 26 Repeat Day Market Update and Stock Scan
Fri, Jun 26, 1:41 PM ET, by Corey Rosenbloom

So far, price is repeating a pattern that we saw yesterday. Both sessions saw rallies ...

June 25 Range Breakout Market Update and Stock Scan
Thu, Jun 25, 2:31 PM ET, by Corey Rosenbloom

After yesterday’s Trend Day Down, price stabilized at support into a morning Range Day. However, ...

Big Picture Planning the Key Support Shelf and Range in Gold
Thu, Jun 25, 2:11 PM ET, by Corey Rosenbloom

On the short-term frame, Gold trades within a well-defined rectangle trading range. Traders can continue ...

June 24 Trend Day Stock Scan and Market Check
Wed, Jun 24, 4:11 PM ET, by Corey Rosenbloom

Logic suggested a downward swing away from resistance today and that’s precisely what we saw. ...

Color Structure and Trend Charts of US Stock Market June 23
Tue, Jun 23, 3:51 PM ET, by Corey Rosenbloom

Let’s take a moment to update our “Color Structure and Price Trend” charts of our ...

3 Top Stocks Currently in Rising Wedge Patterns
Tue, Jun 23, 10:51 AM ET, by Corey Rosenbloom

Which three “Top Stocks” in the S&P 500 with Rising Wedge price patterns are we ...

Scanning the Four Dow Jones Stocks at New 52 Week Highs
Mon, Jun 22, 4:11 PM ET, by Corey Rosenbloom

On Friday and today’s bullish session, four stocks in the Dow Jones Industrial Index of ...

June 22 Big Greek Rally Update and Stock Scan
Mon, Jun 22, 2:11 PM ET, by Corey Rosenbloom

Greece is saved! For the one hundredth time. And stocks boosted higher off the open ...

June 19 Retracement Market Update and Big Trending Stock Scan
Fri, Jun 19, 3:11 PM ET, by Corey Rosenbloom

After two solid up-sessions, price pulled back in a retracement from resistance today. What’s going ...

  More articles:  1 2 3 4 5 6 7 next »

ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »

Comparing Daily Range Volatility in SP500 and Dow Jones | Self Directed Investor | Copyright © 2008 - 2015, All Rights Reserved

Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of BNK Invest, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

SDI is associated with: ValueForum.com -- a subscription-based online social networking forum of serious individual investors. | MarketNewsVideo.com -- videos appearing on SDI are produced by Market News Video. | TickerTech.com -- stock quote content appearing on SDI is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.