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Charts & Analysis

Nearly The Longest Time Since a 2% Decline: Dormant Volatility


In the large cap zone, markets have been very benign. Exactly how benign? Well, it turns out it’s been 233 trading days since we’ve seen a 2% decline. The only time markets saw such a high number of days before a 2% decline was in 2013 – which was a 255 day stretch.
However, don’t read too much into that. Because after that massive 255 day stretch the market fell only about 13% before it recovered – and moved on to new highs within three months!
Nearly The Longest Time Since a 2% Decline: Dormant Volatility
The point isn’t about whether markets should collapse from here. It’s about the fact that markets are not designed to have such little volatility – they tend to get back that volatility at some point.
Too many times I hear the refrain that volatility is dead. It is dormant – like a volcano. And like volcanoes you can’t predict an event when it will burst up again. But such empty spaces in a 2% chart for such long periods usually means life is going to get very interesting.
Nearly The Longest Time Since a 2% Decline: Dormant Volatility
Volatility is good. We just don’t have enough of it!
How do you make money off volatility? Well, there’s options – and there’s options. Mostly, the opportunities come when stocks are beaten down because of forced selling, or by lack of liquidity, and that gives us room for the next big return.


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