The market sure has changed abruptly, almost like driving into a brick wall.  Volume and volatility in the S&P 500 are nothing at all like the last few weeks. In the chart below you can see that the S&P 500 is developing an inside day which should, in nearly all cases, result in the lower aforementioned volume and volatility.

Let’s look at it in some detail.

Last Friday’s volume in the mini-ES (electronic S&P 500 futures) was a healthy 2.296 million trades.  Although the market isn’t closed as I type this, I would estimate Monday’s closing volume – including all overnight trading from Sunday – to be near 1.400 million.  Said another and more direct way: volume has plummeted by 39% in one day!

The daily range of any stock or index can be used as a form of volatility: the greater the range, the higher the volatility and vice versa.  In the chart above we can see that Monday’s range is within Friday’s high and low, so the daily range is much smaller. By this measure, the volatility is ~ 55% LESS than Friday’s.

So what can be causing this?  In my humble opinion, it is the looming election.  If that’s correct, then Wednesday could bring back the volume and volatility in a big way.

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