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   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   reveals   session   surge   take   tend   that   then   there   these   under   values   volatility   which   with   years

| More

Wake Me Up When The Range Day Ends Market Update and Stock Scan March 27
Fri, Mar 27, 3:11 PM ET, by Corey Rosenbloom

Wait – was the market open today? So far nothing’s happened. I’m kidding but that’s ...

VSpike Reversal Intraday Market Update and Focused Stock Scan
Thu, Mar 26, 1:51 PM ET, by Corey Rosenbloom

The selling pressure continued today yet a strong V-Spike Reversal off the 2,050 level may ...

Biogen BIIB Shoots the Moon then Falls to Key Support Pivot
Thu, Mar 26, 1:21 PM ET, by Corey Rosenbloom

We saw an interesting price pattern in high-flying Biogen (BIIB) only to see a harsh ...

Selloff Market Update and Trending Stock Scan March 25
Wed, Mar 25, 2:31 PM ET, by Corey Rosenbloom

We have a second sell-session in a row as the S&P 500 moves down from ...

Repeat Bullish Pattern in Twitter TWTR Calls for New Highs
Tue, Mar 24, 11:21 AM ET, by Corey Rosenbloom

Twitter (TWTR) is back in the news with a bullish breakout and a strong recent ...

March 24 International ETF Color Grid Shows Two Strong Countries
Tue, Mar 24, 11:11 AM ET, by Corey Rosenbloom

Which two country ETFs are breaking out to new highs in a continuing uptrend? And ...

Join Me Live for Monday Morning Market Panel Update
Sun, Mar 22, 9:41 PM ET, by Corey Rosenbloom

Join me live Monday Morning for real-time market commentary and strategy planning for the week ...

March 19 Retracement Market Update and Big Stock Scan
Thu, Mar 19, 2:11 PM ET, by Corey Rosenbloom

After the Federal Reserve dropped the “patient” language but reminded us that recent economic conditions ...

Post Fed Money Flow and Dollar Flash Crash Update
Thu, Mar 19, 1:51 PM ET, by Corey Rosenbloom

Markets today retraced part of the sudden movement following yesterday’s Federal Reserve announcement. Let’s take ...

GoPro GPRO Reveals How to Trade Triangle Breakouts
Wed, Mar 18, 3:31 PM ET, by Corey Rosenbloom

One of my favorite breakout trading patterns is the Triangle, and GoPro (GPRO) just gave ...

March 17 Quick Color Sector Strength Grid
Tue, Mar 17, 11:11 AM ET, by Corey Rosenbloom

With the market near all-time highs again, which sectors are the strongest and which are ...

Big Rally Market Update and Trending Stock Scan March 16
Mon, Mar 16, 1:51 PM ET, by Corey Rosenbloom

Counting today, the last four trading sessions have reversed off clear divergences, and today’s session ...

Stocks Falling Market Update and Trending Stock Scan March 13
Fri, Mar 13, 1:51 PM ET, by Corey Rosenbloom

Divergences can be extremely important in planning and trading intraday market reversals. Momentum and – ...

March 12 Big Bull Market Update and Trending Stock Scan
Thu, Mar 12, 2:31 PM ET, by Corey Rosenbloom

As was suggested in yesterday’s post, stocks stabilized off support with positive divergences and today ...

A Quick Update of Cross Market Money Flow Grid March 11
Wed, Mar 11, 4:11 PM ET, by Corey Rosenbloom

There have been some big moves in the Cross-Market (Intermarket) Money Flow landscape recently. Let’s ...

March 11 Support and Market Update with New Stock Scan
Wed, Mar 11, 3:41 PM ET, by Corey Rosenbloom

Today’s session continued the selling pressure of yesterday, but the bears were less relentless. Buyers ...

March 10 Selloff Update and Trending Stock Scan
Tue, Mar 10, 3:11 PM ET, by Corey Rosenbloom

The selling pressure continued today on the support breakdown under 2,070’s pivot. What resulted – ...

Five Strong Stocks Holding Up Surprisingly Well During the Pullback
Tue, Mar 10, 10:21 AM ET, by Corey Rosenbloom

During market pullbacks, it’s often helpful to step inside the market to see which stocks ...

Returning to a World Where Breadth Divergences Matter
Fri, Mar 6, 12:51 PM ET, by Corey Rosenbloom

It’s easy to get caught up in thinking “The market will go up forever!” when ...

Apple AAPL at Key Trading Pivot Level on Dow Jones News
Fri, Mar 6, 11:51 AM ET, by Corey Rosenbloom

Is Apple (AAPL) a buy right here at a key inflection level as news broke ...

Big Morning Moves for Stocks Gold Treasuries and Dollar
Fri, Mar 6, 11:31 AM ET, by Corey Rosenbloom

Luckily, Friday’s session is exciting – certainly not boring at all! Let’s quickly chart four ...

March 5 Stock Stab Scan and Market Update
Thu, Mar 5, 3:21 PM ET, by Corey Rosenbloom

Stocks stabbed at the lows with more sharp rallies today, as we’ve seen over the ...

March 4 Repeat Day Market Update and Stock Scan
Wed, Mar 4, 2:11 PM ET, by Corey Rosenbloom

Today’s session is playing out identically to yesterday’s session, with the early down-move and the ...

Bull Trap and Target Level Update for Copper JJC
Tue, Mar 3, 12:11 PM ET, by Corey Rosenbloom

What looked like a possible bullish breakout devolved today into a trap as Copper buyers ...

March 2 Reversal Market Update and Trending Stock Scan
Mon, Mar 2, 1:31 PM ET, by Corey Rosenbloom

After forming a base support level, stocks rallied sharply this morning and continued a short-term ...

Yes Stocks can Still Fall Market Update and Trending Stock Scan Feb 27
Fri, Feb 27, 2:11 PM ET, by Corey Rosenbloom

Strangely, stock prices can actually fall and today’s session so far is a very similar ...

Three Strong Country ETFs Joining the US at New Highs
Fri, Feb 27, 1:11 PM ET, by Corey Rosenbloom

As we chart the US S&P 500 (and related ETFs) flirting with more all-time highs, ...

Feb 26 Market Can Actually Fall Update and Stock Scan
Thu, Feb 26, 2:41 PM ET, by Corey Rosenbloom

Can you believe the market can actually fall? I didn’t either! Nevertheless, today’s session is ...

Feb 25 Continuation Market Update and Stock Scan
Wed, Feb 25, 1:11 PM ET, by Corey Rosenbloom

So far, today’s session followed the “opening gap weakness, intervention bullish strength rally later” pattern. ...

John Carter Webinar Tonight! How to Generate Consistent Trading Results
Tue, Feb 24, 1:51 PM ET, by Corey Rosenbloom

I wanted to invite you to a free educational webinar from long-time trader (and clear ...

Feb 24 New Highs Market Update and Stock Scan
Tue, Feb 24, 1:41 PM ET, by Corey Rosenbloom

After the recent sideways consolidation, stocks continued their short-squeeze driven rally and “All Clear” breakout ...

9 Stocks Breaking Strongly to New 52 Week Highs Today
Tue, Feb 24, 11:51 AM ET, by Corey Rosenbloom

As the S&P 500 extends its breakout to new highs – along with the powerful ...

Buying Apple AAPL on Breakouts to New Highs
Mon, Feb 23, 2:51 PM ET, by Corey Rosenbloom

Apple (AAPL) shares broke strongly to new all-time highs today, leaving some traders thrilled and ...

Feb 23 Flat Market Update and New Stock Scan
Mon, Feb 23, 1:51 PM ET, by Corey Rosenbloom

After a powerful short-squeezed breakout to new all-time highs, stocks traded flat to start the ...

John Carter on Simple Strategies for Consistent Account Growth
Sat, Feb 21, 8:11 AM ET, by Corey Rosenbloom

Have you seen John Carter’s newest educational video? Entitled “Why I Trade Options for Consistent ...

Feb 20 Midday Market Update and Stock Scan
Fri, Feb 20, 2:11 PM ET, by Corey Rosenbloom

Today saw a repeat event where the morning started with a quick sell-off yet buyers ...

Feb 19 Weak High Market Update and Daily Stock Scan
Thu, Feb 19, 1:21 PM ET, by Corey Rosenbloom

Surprisingly, the weak new price highs continued with another stab at the upper level again ...

Feb 18 Reversal Market Update and Trending Stock Scan
Wed, Feb 18, 1:11 PM ET, by Corey Rosenbloom

Over the last couple of sessions, as I highlighted to members last night, stocks continued ...

Six Power Trending Stocks to Start the Week
Tue, Feb 17, 12:51 PM ET, by Corey Rosenbloom

As we begin this holiday week fresh from our vacation, let’s highlight six “Power Trending” ...

Feb 13 Bullish Breakout and Trending Stock Scan
Fri, Feb 13, 1:21 PM ET, by Corey Rosenbloom

As logically expected and as I highlighted to members last night, stocks continued their short-squeeze ...

Updating Amazon as it Breaks Higher and Higher
Fri, Feb 13, 12:11 PM ET, by Corey Rosenbloom

Amazon (AMZN) continued its upward pathway following the recent trend reversal and breakway gap. Let’s ...

Feb 12 Breakout and Short Squeeze Update with Power Stock Scan
Thu, Feb 12, 2:11 PM ET, by Corey Rosenbloom

The Short-Squeeze Breakout game-plan triggered this morning and the expected breakout impulse thrust price toward ...

Feb 11 Range Reversal Market Update and Stock Scan
Wed, Feb 11, 3:41 PM ET, by Corey Rosenbloom

Markets STILL are never boring! Today’s action again reminds us of that fact. A rangebound ...

Trading Crude Oil with Divergences into Key Levels
Tue, Feb 10, 11:41 AM ET, by Corey Rosenbloom

How can momentum divergences help your trading style? Simple – by providing early warning signals ...

SP500 Still Playing the Range Ping Pong Game
Tue, Feb 10, 11:11 AM ET, by Corey Rosenbloom

We’re still waiting on your breakout, Mr. Market. ...

Feb 6 Reversal Market Update and Bull Bear Stock Scan
Fri, Feb 6, 1:41 PM ET, by Corey Rosenbloom

Markets are never boring! That’s for sure. What started as a strong, bullish session has ...

Eight Stock Stocks Gapping and Trending Higher Feb 6
Fri, Feb 6, 12:31 PM ET, by Corey Rosenbloom

Intraday traders often scan for stocks that are strong and likely to get stronger so ...

February Market Structure and Trend Reference Charts for Gold Oil Stocks Dollar
Wed, Feb 4, 3:11 PM ET, by Corey Rosenbloom

Let’s step outside the noise and view a broader picture of the reference charts for ...

Feb 4 Trending Stock Scan and Market Update
Wed, Feb 4, 2:21 PM ET, by Corey Rosenbloom

Buyers extended their dominance today, though they’re meeting resistance with divergences, suggesting their bullish swing ...

Feb 3 Big Reversal Update and Bullish Stock Scan
Tue, Feb 3, 2:31 PM ET, by Corey Rosenbloom

After a lengthy positive divergence into support developed yesterday, buyers (unwilling to let the stock ...

  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 over 1000 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.