May 15 2008
Something Interesting is on the Way for the S&P 500
I was taking a look at the S&P this morning when I realized that the Bollinger Bands were getting rather narrow. That got me wondering how narrow the really were. The chart below is what I looked at to get a reference (click to see it full sized).
The middle area is of course price with the Bollinger Bands overlayed. It’s pretty easy to see how pinched they’ve become. The upper line is the Volatility Reference Indicator I developed a while back. It says that the Bands haven’t been this narrow for quite some time now. Bands this narrow mean we’re probably going to see a volatility expanion – most likely in the form of a major directional move – sometime soon.
In case you’re curious, the bottom plot is of an indicator called Trend Intensity. It’s a proprietary one we use where I work. Actually, before too long we might be making it available beyond just the subscribers to our services who normally are the only ones with access.
Here are some other posts which might interest you:
- Gold Looks A Couple Weeks Away From A Big Move
- Looking at Bollinger Bands In Only One Way
- GBP/USD: Can You Say Consolidation?
- AUD/USD: Look for Some Action Soon
- I’m Not the Only One Looking at Volatility
How is the Volatility Reference Indicator calculated?