Since 1927, this is the first time the S&P 500 has had daily moves of less than 0.3% for 13 days in a row. Earlier this year, the Dow recorded its lowest one-month trading range since 1900, and in the summer of 2016, the S&P traded within a 1.77% range for 42 consecutive days, the tightest such streak in history.
It is now 73 trading days since the S&P increased by more than 1% in any one day. Give it another 7 days and we will beat the prior record set back in November 2006 and March 2007. It is no surprise that the VIX has been plumbing new record lows. This has presented a wholly unique challenge to our VIX Volatility Model (VVM) which thrives on volatility. While VVM was up +54.3% earlier this year, it gave back these profits due to these aberrant conditions. Nevertheless, further fine-tuning has helped it adjust to such anomalous market conditions. More importantly, such fine-tuning has not hampered its profits going back to 2009.
The stock market typically looks forward by 6 to 9 months. Given decent odds that rates will be hiked once again when the Fed meets in December, we could be near a tipping point though bull markets can go a lot longer than anyone's guess.
The current stock market malaise is due to reluctant markets that have been artificially inflated since QE began in 2009. Nevertheless, with QE at record levels, markets are pushing on a string as they baby step higher. Keep in mind that when major averages fall by even 2%, leading stocks often fall several percent or more, thus it has been key to keep your stops tight. It has also been profitable to buy when the numerous low risk entry opportunities have presented this year.
Our Voodoo low volume signatures and Wyckoff undercut & rally offer entry points typically less than 2% from the exit point. Meanwhile, upside is typically several percent or greater. Time value is also key as Wyckoff undercut & rally formations typically come after the stock market has a minor correction. Thus with the market bouncing, leading stocks often bounce three to five times as hard yielding excellent profits. Some examples HERE.
Market Lab Report - How much longer can this record breaking tight streak last?
| Published: | 8 Aug 2017 14:43 ET |
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