Watching Volatility on Different Time Frames
Watching Volatility on Different Time Frames
Does it matter which times periods (i.e., hours, days, weeks, etc.) are used to predict large
market moves? The answer is, absolutely not.
Even though we mostly talk about daily readings on
this site, other time frames are equally appropriate. All volatility is mean reverting, and low
volatility situations in any time frame can be used.
A good example to look at is the NASDAQ market at the beginning of this year. Coming
into January 1, the six-week volatility was at 11 percent and the 100-week volatility was 25
percent. Over the next four weeks, the market rose more than 14 percent.
MARKETS TO WATCH: The Internet Index and the Computer Software Index are registering
low volatility readings and are setting themselves up for a significant move.
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