Be on the Lookout for “Volatility Clusters”

[Trading With Larry Benedict]( Be on the Lookout for “Volatility Clusters” By Larry Benedict, editor, Trading With Larry Benedict The jobs market had started showing signs of a struggle earlier this year. Job numbers steadily declined while unemployment rose. July’s 4.3% unemployment rate was its highest level since October 2021. So the Federal Reserve’s larger-than-expected 0.5% cut last month proved it was paying close attention to the situation. That’s also why last week’s data release was such good news. The September payrolls report showed that employers created 254,000 jobs during the month. That easily surpassed the 150,000 new jobs that economists expected. Likewise, the unemployment rate fell to 4.1% in the latest print. The improved figures should’ve provided the sigh of relief investors were searching for. But instead, a sign of fear among investors is trending higher… Recommended Link [This Wild Energy Secret Could Swing the Vote]( [image]( Energy is life... And this year, it could also decide the 2024 election. Hidden in America's forgotten towns, [a groundbreaking energy discovery is emerging](. And it could shape the next four years of American life more than the border, tax cuts or gender politics. [This urgent new documentary]( reveals how this new tech could solve America’s energy crisis, with details on the one company with a virtual monopoly on it: -- Measuring Investor Fear Fear and greed constantly tug at investor emotions. And despite the good news on the jobs front, fear is creeping into the stock market. You can see that with the CBOE Volatility Index (VIX). Many refer to the VIX as Wall Street’s fear gauge. It measures implied volatility on the S&P 500. The VIX usually jumps higher when the S&P 500 pulls back. That’s because daily price movements pick up when the stock market is selling off. In fact, some of the worst market declines in history have seen sharp spikes higher in the VIX. Take a look at the long-term chart below. [(Click here to expand image)]( During the sell-off following the pandemic in 2020, the VIX jumped to over 80. And it saw its highest level ever during the financial crisis in 2008. But volatility like this has a distinguishing feature… It tends to cluster. One volatile trading session marked by downside is typically followed by more over the near term. These clusters are similar to a heart rate monitor when a patient is in crisis. Stress levels go into overdrive and repeatedly send the VIX higher. And despite the stock market’s calm surface recently, the VIX bears watching right now. Free Trading Resources Have you checked out Larry's free trading resources on his website? It contains a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. The VIX Is Quietly Moving Higher Since its inception in 1990, the VIX’s average value is near 19. When the VIX starts pushing above that level, we should be on the lookout for another volatility cluster. Look at what happened back in early August (the arrow in the chart below). The horizontal line shows the long-term VIX average at 19. [(Click here to expand image)]( As the VIX started jumping above the long-term average, stocks plunged around the world. The S&P 500 fell over 8% from the July peak. And the VIX’s action seems to be the start of another volatility cluster. Take a look at what’s happening with VIX today (the circle on the chart). The VIX has risen steadily. It reached the 22 level in early September and is back in that range again this month. Despite these spikes higher, the stock market has stayed relatively tranquil. But that may not last… If VIX continues pushing higher than the 22 level, that’s a warning sign. And traders should be wary of bumps to come in the stock market. I [shared recently]( about October historically being the most volatile month. And with elections around the corner, I see multiple reasons for caution in the weeks ahead. So despite the momentary calm in stocks, keep an eye on what’s developing with volatility trends… Regards, Larry Benedict Editor, Trading With Larry Benedict [The Opportunistic Trader]( The Opportunistic Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.opportunistictrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. The Opportunistic Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-888-208-6550, Mon–Fri, 9am–5pm ET, or email us [here](mailto:feedback@opportunistictrader.com). © 2024 Omnia Research, LLC. All rights reserved. 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