Don’t call it a boring market, but the failure to see a sustainable move up or down by the major indices can lead to investor impatience.
“It’s a trading range job that has effectively marked major indices for … several months,” market technician Katie Stockton said in a phone interview Friday.
S&P 500 index
It has ranged from about 3,800 to nearly 4,200 since late December. It has moved towards the upper end of that range after pulling back last month around the Silicon Valley bank crash on March 10, but has struggled to follow through to the upside in the past week.
Bears were frustrated by the market rallying from March lows despite uncertainty following last month’s banking chaos, rising geopolitical tensions and widespread expectations of an imminent recession.
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“When we had short-term ups and downs, it was hard to capitalize on it, obviously, from a market timing perspective. And they don’t allow people to take a directional bias of any duration. I think that’s where the frustration comes from,” said Stockton, founder and managing partner of Fairlead Strategies. .
“It’s been a tough week,” Tom Lee, co-founder of Fundstrat Global Advisers, said in a note Friday.
The S&P 500 reached a two-month high of 4,170 on Tuesday, but continued to fall on Wednesday and Thursday (see chart above). “One can’t really say what dictates the direction of the market on any given day. Obviously, that’s frustrating for investors.
Stocks made small gains on Friday, but ended the week with small losses. The S&P 500 lost 0.1% for the week, while the Dow Jones Industrial Average lost 0.1%
And the Nasdaq Composite Index fell 0.2%
Is not following a signal that the market is running out of steam?
Stockton said the Nasdaq 100 focused on big tech
It lost some momentum, but that didn’t carry over into the S&P 500. It would take consecutive weekly closes above resistance at 4155 to turn the outlook further bullish.
“It doesn’t necessarily mean that we’re starting a one- or two-year bullish cycle, but it will certainly improve the outlook for the next several months,” she said, and could be a counterweight to the weaker quarters that are starting to roll in.
Some market watchers see signs of exhaustion, and are also not comfortable with the Cboe’s volatility index declining
Well below its long-term average of near 20.
“The market is feeling ‘tired’ and perhaps a little complacent given the VIX continues to slide lower,” market technologist Andrew Adams said in a note for Saut Strategy.
“It probably takes quite a bit of buying power just to keep stocks supported over the past few months amidst fundamental headwinds, so perhaps the bulls are already exhausted and need to catch a breath,” he wrote.
Although there aren’t any clear sell signals, Adams said that a rally towards the 4,300 region by the S&P 500 – an area he expects to offer significant resistance and a “perfect spot” for a reversal – would have him “tottering” risk in a major way, a process that He really started it by reducing trade sizes and closing some open positions due to concerns that the risk/reward setup was starting to skew to the downside.
As for disappointing price action, investors may want to get used to a period of relative calm, said Mark Hackett, head of investment research at Nationwide.
On a recent note, he called the current setup a “sandwich market,” marking a transition “between the last few years of unusual market activity from the pandemic and the volatility coming from the 2024 presidential election.
“Even with a debt ceiling debate looming, which we know will be devastating, we see this 6-9 month period of relative calm and clarity as a buying opportunity,” he wrote.
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