Don’t call it a boring market, but the lack of sustained up or down movement in major indexes can leave impatient investors banging their heads against the wall.
“It’s a function of trading range that has effectively characterized the major indices for … several months,” market analyst Katie Stockton said in a phone interview on Friday.
The S&P 500 Index
SPX
has been between around 3,800 and almost 4,200 since the end of December. It moved to the top end of this range after a pullback last month around the Silicon Valley bank collapse on March 10, but has struggled to push higher for the past week.
Bears have been frustrated by the market’s rally from March’s lows, despite uncertainty amid last month’s banking chaos, rising geopolitical tensions and widespread expectations of a near impending recession.
Read: Why bears can’t keep the stock market down despite bad news
“Obviously, from a market timing perspective, when we had short-term ups and downs, it was difficult to take advantage of them. And they don’t allow people to take a directional tilt of any duration. I think that’s where the frustration comes from,” said Stockton, the founder and managing partner of Fairlead Strategies.
“It’s been a tough week,” said Tom Lee, co-founder of Fundstrat Global Advisers, in a statement on Friday.
The S&P 500 hit a two-month high just below 4,170 on Tuesday, but then continued to decline on Wednesday and Thursday (see chart above). “You can never really tell what is driving the market in the right direction in a single day. This is obviously frustrating for investors,” he wrote.
Stocks made tiny gains on Friday but ended the week with small losses. The S&P 500 lost 0.1% this week, while the Dow Jones Industrial Average fell
DJIA
lost 0.2% and the Nasdaq Composite
COMP
gave up 0.4%>
Is the lack of follow-through a sign that the market rally is running out of steam?
Stockton said the megacap tech-centric Nasdaq-100
NDX
lost some momentum, but that hasn’t translated to the S&P 500.
“That wouldn’t necessarily mean we’ve entered a one- or two-year bull cycle, but it would certainly improve the outlook for the next few months,” she said, and could counterbalance weak seasons that may start in .
Some market watchers are seeing signs of fatigue and also find little solace in the drop in the Cboe volatility index
IX
well below its long-term average near 20.
“The market is feeling ‘tired’ and perhaps a little complacent as the VIX continues to slide lower,” market technician Andrew Adams said in a note for Saut Strategy.
“It’s probably taken quite a bit of buying power to sustain stocks amid fundamental headwinds over the past few months, so perhaps bulls are indeed exhausted and need to catch their breath,” he wrote.
Although there were no obvious sell signals, Adams said a surge in the S&P 500 towards the 4,300 region — an area he expects to offer major resistance and a “perfect point” for a reversal — prompts him to do so would “roll up”. ” Risk big, a process he has already started by reducing position sizes and closing some open positions on concerns that the risk/reward setup is starting to skew to the downside.
As for frustrating price action, perhaps investors should get used to a period of relative calm, said Mark Hackett, Nationwide’s head of investment research.
In a recent note, he described the current setup as a “sandwich market” that marks a transition “between the past few years of unusual market activity due to the pandemic and the upcoming volatility due to the 2024 presidential election.
“Even though a debt ceiling debate looms, which we know will be disruptive, we view this 6-9 month period of relative calm and clarity as a buying opportunity,” he wrote.
See: How US Debt Ceiling Concerns May Affect Markets
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