|
Sharpcharts offers two indicators to measure volatility: Standard Deviation and Average True Range (ATR). Standard Deviation is the classic quantitative measure of volatility that measures variation from average price. ATR uses the high-low range for the current day and the close of the prior day to calculate a range. You can read more formula details in our ChartSchool.
The chart below shows SPY with the 20-day Standard Deviation and 20-day Average True Range. 20 days is about one month. Both indicators moved lower through 2009. The Standard Deviation experienced a few hiccups with surges in March and late July, but ATR marched steadily lower. Both broke to new lows for the year in December. The S&P 500 Volatility Index ($VIX) is overlaid on the SPY price plot. Notice that it fell along with these volatility indicators, which makes sense. Also notice that SPY advanced while all three volatility measures declines. It appears that the stock market likes falling volatility.
Click this image for details
The chart below shows SPY with the 20-day Standard Deviation and 20-day Average True Range. 20 days is about one month. Both indicators moved lower through 2009. The Standard Deviation experienced a few hiccups with surges in March and late July, but ATR marched steadily lower. Both broke to new lows for the year in December. The S&P 500 Volatility Index ($VIX) is overlaid on the SPY price plot. Notice that it fell along with these volatility indicators, which makes sense. Also notice that SPY advanced while all three volatility measures declines. It appears that the stock market likes falling volatility.
Click this image for details
