The Big Crunch

This chart shows market is due for a 5% slide

Key Points
  • We haven't seen a one-day move of 5 percent in more than six years.
  • Volatility has been crazy low over the past year.
Market looks due for a 5-percent move, based on historical data

The stock market's run of low volatility may be coming to an end. That's according to the historical trends seen in some market charts tracing the back to 1950.

There appears to be a natural pattern of how long the market can go without a big move. The charts below show how long the S&P went without a 5 percent single-day move. The charts for a 3 percent or 4 percent move are similar enough they don't need to be repeated.

Think of an earthquake seismograph or heart rate monitor. They usually show certain repeatable patterns that happen over and over again. The charts of trading days between 5 percent gains or losses is kind of like that.

Looking at the history of the market, we're reaching a point right now where those streaks of trading days without big moves have come to an end. That could be in the cards for the market right now.

The bigger question is direction: Will that next big move be up or down?

Historically, a big up move has often been paired with a big down move, separated only by a few days. That suggests that if volatility returns, we could be in for a wild move in both directions. Of course, it's impossible to time the market, but if a big drop comes, it's important to remember there could be a big jump right around the corner.