After 2 years of low volatility (cf. blog: VIX at 24 and so what?), market is now… different.

To apprehend and visualize this spike in recent volatility, the Average True Range (ATR) can be very helpful.

6 weeks ago, I looked at the daily ATR for more than 1,300 U.S. stocks:

 https://twitter.com/GregoireDup/status/1040190100070494209

I did the same today:

Which gives the following (green 6 weeks ago vs blue today):

We moved from 2% to 3% daily ATR.

5% moves are x5 than 6 weeks ago.

Russell 2000 has same ATR as Emerging Markets.

Stocks can experience big moves and unlike other assets they can open with gaps.

Looking at this spike in volatility, ATR is a good tool for risk management and limiting your downside is a top priority.

In 2016-2017, we experienced very low volatility. Everything was exacerbated by low yields, passive investment, QE, share buybacks, etc.

For sure, we can put the blame on the earnings season but that would be too easy.

I hope it helps,
Gregoire

 

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