JPMorgan Reckons This Flashing Indicator Means Stocks Are Poised To Rally

JPMorgan Reckons This Flashing Indicator Means Stocks Are Poised To Rally
Andrew Rummer

about 2 years ago1 min

Mentioned in story

Strategists at JPMorgan reckon a market signal triggered two weeks ago means stocks are poised to climb.

The chart’s top panel shows the CBOE’s Volatility Index, a measure of so-called implied volatility derived from how much traders are willing to pay for options on the benchmark S&P 500 Index. The blue circles show when the Volatility Index, known as the VIX after its ticker, jumped by more than 50% of its one-month moving average.

The lower panel shows the six-month performance of the S&P 500 following each blue-circled trigger, dating back to 1990. JPMorgan pointed out in a report this week that the S&P 500 has posted gains in the six months following each signal – if you exclude those that occurred during economic recessions (shown by the red shading).

The S&P 500 has climbed by an average of 9% in the six months following previous signals, according to JPMorgan. The signal most recently triggered on January 25th as implied volatility surged. It also triggered three months ago in November.

JPMorgan’s strategy team forecasts that the S&P 500 will end the year at 5,050, about 12% above its current level.

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