In July, the VIX, the volatility index of the S&P500, increased from 12 to 19.
According to DataTrek, in the past 34 years, there have been five instances where the VIX reached its highest level of the year in August.
While I anticipate a significant increase in volatility in August, indicating a larger bearish wave for the S&P500, I recognize the possibility that the benchmark index may experience a rebound before that.
According to SentimenTrader, this is the 11th time since 1928 that the S&P500 has dropped from a high to a level below its 50-day moving average within six trading sessions or less. This represents a 5% decline for the S&P500.
In the first 10 occurrences, over a two-week period, the S&P500 recorded an average return of +3.1% and had a positive performance in 80% of the cases.
Sources:
SentimenTrader. A trend change signal with a perfect record, July 25, 2024.
The Compound, Surprise is the Most Powerful Force in the Stock Market, July 29, 2024.
Caution: This publication is for educational purposes only and does not constitute a formal investment recommendation, highlighting the importance of conducting your own research.
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