Like just about every other year, volatility in the market picked up as traders and investors came back from the beach in September. With a decline of over 1% on Tuesday, the net advance/decline (A/D) reading on the S&P 500 registered -457, marking the sixth all-or-nothing day for the S&P 500 since Labor Day. For those not familiar with the term, we consider an all-or-nothing day to be any trading day where the net A/D reading for the S&P 500 is greater than +400 or less than -400. With Tuesday's move, the S&P 500 has seen its 26th all-or-nothing day of the year, which puts the index on pace for 33 this year. At this rate, 2016 will come up short of the 38 occurrences in 2015 but still would rank as the sixth most number of occurrences for a given year since 1990.
Looking at the chart, you can also see a clear trend where the number of occurrences has increased as ETFs have gained in popularity. Because ETFs allow an investor to move an entire basket of stocks in one trade, the market has become increasingly one-sided in terms of its daily moves. On big up days, nearly everything rallies ('all'), while on days like Tuesday, nearly everything declines ('nothing').
While the chart above shows that 2016 is on pace for 33 all-or-nothing days, the year could really come in anywhere from the current level of 26 to a much higher number. The reality is that all-or-nothing days tend to come in clusters, so if the market enters a period of increased volatility, we should see more frequent occurrences, whereas if volatility declines, the pace of all or nothing days will dry up. The occurrences of all-or-nothing days in 2016 provides a perfect example. As shown in the chart below, outside of Tuesday's occurrence and two in April and May of earlier this year every other all-or-nothing day has occurred within 10 trading days of another one.