S&P 500's Volatility at Lowest Level in over 23 Years

S&P 500's Volatility at Lowest Level in over 23 Years

Posted on April 10, 2017
Weekly Update
4/10/2017

Market State 2: Bullish/Rational (14 trading days): - Market State 2 is typically in place following a short-term market correction. Markets or securities do not go up in a straight line. A typical bull market pattern will look similar to a stair step pattern of new highs followed by a pullback that is higher than the previous low followed by a higher high.



Canterbury Volatility Index (CVI 34) The S&P 500’s volatility remains at an extreme low level. In fact, the CVI is now one point lower than its previous low 10 years ago. The last time the volatility was lower was January 7, 1994 at CVI 32. This type of market environment can experience one day outliers of 1.25% or more.



Comment:
The NASDAQ 100 has continued to outperform the S&P 500. Most U. S. equity market indexes perform better when the NASDAQ is stronger than the S&P 500.


Source: All Charts AIQ
 
The two largest S&P 500 sectors are the Technology and Financial sectors accounting for 21% and 16% respectively (37% of the total S&P 500’s weighting). In addition, the Technology and Financial Sector ETFs (Symbol XLK and XLF) are up +22% and +32% respectively over the last year. The S&P 500 ETF (Symbol SPY) is up about +17% over the same period.*
 
Observations:
  • The Portfolio Thermostat Markets remain in a Bullish Market State.
  • The S&P 500’s momentum has grinded to a crawl.
  • The Technology and Financial Sectors are carrying a large percentage of the S&P 500’s performance.
  • The S&P 500 is masking the weaknes in US equities overall.
  • The Technology, and to a lesser degree Financial Sector, are over extended (parabolic advance).
     
Bottom Line:
The S&P 500 is only down about 1.7% from it’s March 1st high. Our studies show that corrections of 5% or less are random market noise. Don’t confuse the upcoming volatility, that is a result of squeezing down the trading range, with a move to a Transitional or Bearish Market State environment. The Portfolio Thermostat’s algorithms will tell us when there is a shift in the market environment. As it stands now, we remain in a long term bull market. Even more important, our Canterbury Portfolio Thermostat holdings continue to achieve the internal metrics required to remain in a bullish Portfolio State.
 
We have a year end video available to anyone who would like a more indepth understanding of the Canterbury Portfolio Thermostat process. Contact our office for more information.
 
*Data for SPDR Sector Performance – State Street Global Advisors


Canterbury Investment Management: Tom Hardin

More About Tom Hardin
As Chief Investment Officer, Tom has more than 30 years of experience in the investment management industry and has a broad breadth of knowledge. He is known as an innovator, educator and has been revolutionary in the advancements of portfolio and risk management.


Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.