Volatility Check-Up

Along with the VIX, another way that we track market volatility is with the 50-day average absolute daily % change.  This measures the average +/- daily change of the S&P 500 over the last 50 days.  Below is a chart of the reading going back to 1997.  In case you forgot, market volatility during the 2008 financial collapse was as high as it has ever been.  In early December 2008, the S&P 500 was average a daily move of +/-4.02% per day!  At that time, the entire US equity market was gaining or losing nearly 5% of its total value on a daily basis!  Thankfully things have settled down. 

So where does the reading stand now?  Over the last 50 days, the S&P has had an average daily change of +/-0.84%.  As shown in the chart, the reading had gotten much lower prior to the correction we saw this spring and summer.  It then spiked up to nearly +/-1.50% in June when sovereign debt problems reached a peak.  If 2008 hadn't happened, this spike would have been pretty significant, but now it just looks like a small aftershock.  Since peaking in June, the average daily change has been cut nearly in half, but it will need to be cut in half again to get down to the +/-0.49% 50-day average seen in April of this year.

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