Wednesday, October 25, 2006

Low S&P Volatility

Brett Steenbarger has posted a pair of articles here and here in which he discusses bullish and bearish implications of various levels of volatility in the S&P 500 index.

I think his principal observation is that periods of unusually low volatility, like the one we are in now, are generally followed by periods of rising stock prices. Bear markets are likely to begin and to end during periods of relatively high volatility.

This matches well with my own observations and is yet another reason why I think any break in stock prices from current or slightly higher levels will be brief and relatively shallow ( 10 to 15 % in the averages.

1 comment:

Anonymous said...

For almost 2 years i have read and thought through your posts with great interest.I would be interested in how you are reconciling your thoughts of a 10 to 15 percent break expressed in this post with the return to dow 9800 as expressed in the lindsay posts.