Volatility Falls to a 1-Year Low

Below is one of the many charts from this week’s Thrasher Analytics letter that was sent to subscribers on Sunday.

In my 2017 Charles Dow Award winning paper, Forecasting a Volatility Tsunami, I discuss that just because the VIX has declined for several days or weeks, has not been strong evidence that a spike in volatility will occur. However, in the latest letter to subscribers, I shared that when we look at multiple points of volatility and when they are all hitting fresh yearly lows it has often been followed by a slowing of the decline in spot Volatility and often a rise of varying degree.

Below is a chart showing when 9-day, 30-day, and 3-month Volatility are all at a 1-year low as they were on Friday. This is different than the analysis used in the Volatility Risk Trigger (VRT) that seeks to time possible spikes in the VIX (shared in each week’s letter). You can see from the blue dots that when we have this much of the curve at a major new low, spot Volatility has often (but not always) slowed its decent and often begun to rise in the following couple of weeks.

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