Heading into Monday's session, the S&P had gone for 34 consecutive trading sessions in which it hadn't experienced an intraday move greater than 1%: according to the WSJ's Market Data Group, this was the longest such streak going back over two decades, to 1995. And, following the Monday close, the market made history when it ended yet another day by being confined to a 1% trading range. This made it 35 consecutive sessions without an intraday move of 1% or more. With Tuesday's somnolent market action and virtually unchanged close, the streak extended to 36 consecutive sessions - the longest streak in history.
For those who have followed the market, the boredom - at least on the surface - is palpable, despite what RBC pointed out last week when it said that "it is CRAZY what is going on “under the hood,” when on the index level, it’s so optically calm.” However, with most market watchers looking simplistically at aggregate level data, the S&P gives a sense of calm that is at odds with the recently documented surge in political uncertainty.
The recent calm is a sharp contrast with what was taking place in the market just a year ago: on this week in 2016, oil was $26/bbl, the HY spread was 900bps, the S&P was 1810, EPS was negative, inflation expectations were 1%, VIX 30. Today, oil is $54/bbl, the HY spread 400bps, and the S&P is just shy of 2300, EPS positive, inflation expectations are 2%, and VIX 11.
Some observations: the average daily range between a session’s intraday high and low over that stretch, dating back to Dec. 14, is just 0.54%, according to FactSet. That compares to the S&P 500?s average daily trading range in 2016, which was 0.96%.
As the WSJ further notes, despite the lack of sharp moves, the stock market has mostly been levitating higher "even though the daily moves have been soporific." Since the streak began in December, the index has climbed just 1% in total, but it’s still managed to set a new all-time highs along the way, most recently this week. Still, uncertainty about the future of Trump administration policies have worked in concert with record high valuations and the wait-and-see approach on the part of the Federal Reserve about when next to raise interest rates to hold stocks in check.
“The market is bobbing and weaving around new highs,” wrote David Rosenberg, chief economist, and strategist at Gluskin Sheff.
That’s a sharp contrast to how the S&P behaved just three months ago, in the immediate aftermath of the surprise victory of President Donald Trump on Nov. 8, when the S&P 500 shot up 6.2% from Election Day to Dec. 13, just over a month later.
Furthermore, the absence of a one-day move in the S&P 500 is consistent with other readings of ultra-low volatility. The historical volatility of the SPY ETF, a measure of how volatile that S&P 500 has been over two months, sits at 6.5, the lowest in at least two years, according to CBOE Livevol. Ninety-day historical volatility is barely higher at 8.1, also the lowest in two years.
Expectations for future prices swings in the S&P 500 over the next 30 days are scarcely higher. The VIX has been depressed to near record lows since the election. The VIX is currently at 11.3, well below its long-term average near 20.
Still, the doldrums may be ending soon. As Jason Goepfert at SentimenTrader, quoted by Art Cashin, notes the market is showing little enthusiasm to the upside despite the record highs in the S&P:
Negative momentum is picking up under the surface. Even as the major stock indexes hit all-time highs, or were close to them on Friday, stocks in the S&P 1500 index weren't showing as much enthusiasm. Gauged by the Relative Strength Index, an abnormally low number of stocks have seen extreme positive momentum, and a rising number are seeing extreme negative momentum.
Indecision after a buying thrust. Friday's surge at the open left an unfilled gap, as prices never neared Thursday's closing price during the day. Then on Monday, traders showed indecision with an inside day, a lower high and higher low than Friday's session. That has led to subpar returns, even during this bull market.
Ultimately it will be up to traders to force a break out to a new trading range, and since they have been unable to do so for nearly two months to the upside, perhaps it is time to revisit what a market drop actually means.