'Volatility Is Dead' Debate Heats Up As S&P 500 Braces For The Worst 10 Days Of The Year

The S&P 500 index has proven itself to be a seasoned sailor in 2023, gliding gracefully through market waters, steering clear of perilous tempests that could have thrown it off course.

For more than 100 trading sessions, the S&P 500, as tracked by the SPDR S&P 500 ETF Trust SPY has displayed remarkable resilience, with daily fluctuations never exceeding a 1.5% drop.

And, just once in the entire year, on Feb. 21, did the index dip by a modest 2%, a hiccup in an otherwise smooth voyage.

During this extended period of relative calm, the CBOE Volatility Index, affectionately known as the “fear index” or VIX, has performed a vanishing act.

For 78 consecutive sessions, the VIX has remained below the level of 19, indicating a persistent trend of declining volatility in the stock market.

September brought with it the lowest figure yet, a mere 12.68, the lowest since January 2020.

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S&P 500 Enters The Worst Time Of The Year

But here’s where our financial odyssey takes an intriguing twist.

As the calendar flips to the last days of September, it is time for what Bank of America called “the worst 10 days of the year” for the S&P 500 in terms of seasonality.

As analysts at Bank of America wrote in a recent note, Sept. 18 begins the last 10 days of September, which is the toughest 10-day stretch of the year for the S&P 500 Index, with the index up only 40% of the time on an average return of -1.11%.

So far, what September has delivered hasn’t been particularly favorable. The S&P 500 has been dropping by 1.27% over the initial 10 sessions of September, a figure well below the average first 10 days of September return of -0.36%.

When the early days disappoint, the late days often follow suit. The S&P 500’s performance during the last 10 days of September has been rather lackluster.

The index recorded a gain only 41% of the time, and its average return is negative by 1.66%.

The calm that has lulled us thus far is now entering its most critical phase of the year.

Statistics	S&P 500 Returns (Last 10 Days of September)	Last 10 Days of September when S&P 500 is above average for first 10 days	Last 10 Days of September when S&P 500 is below average for first 10 days
Average	-1.11%	-0.58%	-1.66%
Median	-0.66%	-0.51%	-0.77%
% of time up	40.00%	38.78%	41.30%
Std Dev	3.64%	2.00%	4.77%
Min	-17.85%	-5.34%	-17.85%
Max	7.20%	3.82%	7.20%
#obs	95	49	46

S&P 500 Technical Analysis

Technical analysts at Bank of America now see the corrective trend of the index extending further.

“After testing the 4590-4637 resistance levels during the July move to 4607, the SPX has undergone a correction,” Bank of America wrote.

If the index stays below the downtrend line from late July and the lower high at 4512-4541 recorded in early September, there’s the potential for the corrective phase to endure.

Noteworthy support levels encompass 4430-4415, 4335-4325 (comprising the ascending 26-week MA and the area of the summer 2023 breakout/retest), and 4210-4195 (encompassing the ascending 40-week MA and the region of the June breakout).

S&P 500 Weekly Chart

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