SPX 20-day historical volatility just hit a 2017 high
The
S&P 500 Index (SPX) has been grinding its way higher in 2017 -- up 10%, and not far removed from its Aug. 8 record peak of 2,490.87. While most of this has been a slow churn, stock volatility has ramped up dramatically in recent weeks, along with
political uncertainties and the risks surrounding Hurricanes Harvey and Irma. In fact, 20-day
historical volatility (HV) for the SPX just reached a year-to-date high, signaling a strong uptick in movement in stock prices.
With this in mind, Schaeffer's Senior Quantitative Analyst Rocky White decided to look back at historical returns after SPX HV hits a year-to-date high in September. Our data begins back in 1929, and since then there's been only three other times 20-day HV has hit a year-to-date high in September, and each time the S&P went on to end the year strong. Of course, the most recent of these "signals" was all the way back in 1959.
Still, if past is precedent, this small sample size suggests there's a chance stocks enjoy strong gains in the remainder of the year. Of all the prior signals, this year's SPX year-to-date return is the second highest at 10.6%, and the only signal with a higher return, in 1954, was followed by a nearly 20% rise in the SPX for the rest of the year.
Going off this, Schaeffer's Quantitative Analyst Chris Prybal also noted that the 20-day rate of change on the SPX HV is above 200%. As such, historical volatility for S&P 500 has doubled in the past 20 days alone.
