Tuesday's Market Minute: Volatility Alert: March is a Seasonally Volatile Month

When we put the first two months of the year into perspective, the market has performed well on a relative basis. From a technical standpoint, the S&P 500 has broken through its 20-day SMA, market breadth has been substantial, and earnings did not collapse as most had expected.

The downward sloping trendline from last year's highs has also been broken, along with the 200-day SMA. There are many things to be proud of to start the year. However, it is now time to buckle up, and here's why.

Regardless of the timeframe, be it 5-years, 10-years, or even 20-years, March has been the most volatile month measured by the VIX. On a 5-year basis, the average peak for the VIX is above 31, which equates to approximately a 1.93% implied move in the market either to the upside or downside.

We can have a conversation about historical volatility and implied volatility, and most of the time, the market anticipates volatility more than what is realized, but sentiment is the same. A concerning development would be the market reversing back below the 200-day moving average and remaining below that average for three consecutive sessions. The probability of this type of event occurring grows higher as we enter March.

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