Relative Range Expansion in the S&P 500 Index

I noticed that the average daily range for the S&P 500 Index (SPY) over the past week has been quite elevated compared with its norm. So I took a ratio of the average five-day high-low range and expressed it as a percentage of the average 50-day high low range. During the last week, the average range for SPY has been twice its 50-day average.

Since 2000, we've only seen 43 occasions in which the average five-day range in SPY has exceeded the average 50-day range by 75% or more. Interestingly, those occasions included some major periods of market turmoil--and some major intermediate-term market bottoms, including September, 2001; July, 2002; March, 2007; July/August, 2007; and January, 2008.

Twenty days after the spike in relative range, SPY averaged a 20-day gain of 3.17% (34 up, 9 down), much stronger than the average 20-day loss of -.74% for the remainder of the sample. When the five-day range was less than 75% of the 50-day range since 2000 (N = 333), the next 20 days in SPY have averaged a loss of -1.95%. It appears that relatively quiet markets have offered quite a bit less upside opportunity than markets in turmoil.
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