The State of Realized Volatility: No panic selling yet

Closeup hand pointing pen on blue colour monitor to analyse stock market graph

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Major market averages remained under pressure on the week as they ended in negative territory. While markets closed lower on the week, they did so in a relatively orderly fashion as panic selling still has not been observed. Despite a rising rate environment, a hawkish Federal Reserve, and rising yields, Wall Street seems calm and collective as benchmark indices slide.

PriceVol Indicator

PriceVol, is not showing signs of panic selling as data pointed to a 5-day average level of 6.3, a far cry from the 10 handle which signifies a high market volatility signal. The 6.3 reading is slightly elevated from the previous week’s 6.0 mark, but it appears rather calm.

Additionally, PriceVol, a branded trading tool created by ASYMmetric ETFs aims to calculate the complete landscape of the volatility reflected in the entire S&P 500. See below a side-by-side chart outlining the dispersion of returns compared to the historical PriceVol history. Investors will notice that the compact readings in the dispersion chart lend themselves to a low volatility environment, as high volatility setting blow apart as investors panic sell.

Where was volatility seen?

Exchange traded funds that track the moves of the S&P 500 like the world’s largest fund SPDR S&P 500 ETF Trust (NYSEARCA:SPY) and its competitor ETF, the Vanguard 500 Index Fund (NYSEARCA:VOO) closed out the trading week lower by nearly 3% as the S&P VIX Index (VIX) finished the week lower by 2%.

On a sector-by-sector basis, the Health Care (XLV) segment of the S&P observed the highest level of realized volatility at 8.7, whereas the Utilities (XLU) sector was seen on the other end with the lowest weekly realized volatility levels at 3.7.

When examining the rate of change in PriceVol, investors will have noticed that the Communications (NYSEARCA:XLC) sector of the market experienced the largest W-o-W increase of 47%. At the end of the week the Communication’s space concluded as the area with the second highest PriceVol reading at 8.3. See a breakdown of each sector’s PriceVol level for the week:

ASYMmetric S&P 500 ETF (NYSEARCA:ASPY) is an ETF that was created from the PriceVol indicator. ASPY works as a quantitative long/short hedging strategy that seeks to offer investors a backstop against bear market selloffs by being net short, while also seeks to capture the majority of bull market gains, by being net long.

See below the performances of all five ETFs discussed across multiple time frames.