Is This Market TOO Quiet?

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Stocks have seemingly gone into a holding pattern, barely moving as investors have apparently run out of reasons to buy or sell.

On Monday, the S&P 500 gained 0.07% as the market shrugged off steep overnight losses in the futures session on news Japan has fallen back into a technical recession in the aftermath of a steep sales tax hike. Some dovish chatter out of the European Central Bank and high-profile M&A activity turned the tide.

After the powerful rise out of the Oct. 15 low, the S&P 500 has yet to close below its five-day moving average — a run of consistency that hasn’t been seen since the 1990s. It’s been 22 straight days, if you’re keeping a count at home.

S&P 500

In fact, the current range on the S&P 500 is the tightest in history. Over the last six sessions the S&P 500 hasn’t moved more than 0.077% on a closing basis. The next tightest range was in 1965 at 0.08%. Pretty incredible when you consider all the balls in the air right now — Ukraine, Obama vs. Republicans, Fed ending QE3, and more — and the fact that we just out of the most volatile trading conditions in a year in the middle of October.

And this comes as the bull market that started in 2009 get a little long in the tooth: It is five-and-a-half years old vs. an average of about 3.5 years since 1897. Should investors be worried?

If you just watch U.S. large-caps, than the answer is no. But if you look over at what’s happening in the options market, the bond market and in small-cap stocks, the answer is yes.

hyg

The Russell 2000 small-cap index dropped 0.8% for its third loss in a row in what’s the worst streak since the middle of October. The iShares iBoxx $ High Yid Corp Bond (ETF) (HYG) is down three days in a row as well, pushing below its 200-day moving average as junk bonds come under pressure. And the CBOE Volatility Index (VIX), Wall Street’s “fear gauge,” has popped back over its 200-day moving average and is up 13% from its lows last Monday.

Even sector-level activity suggests caution is warranted. Utilities led the way today, up 1.3% as a group followed by the 0.6% rise in consumer staples and the 0.5% rise in health care. Cyclicals like energy, technology, and consumer discretionary led the decliners.

As a result, I continue to recommend a focus on defensive positioning with the Velocity Shares 2x VIX (TVIX) up more than 4% for Edge subscribers over the past week.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.

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Article printed from InvestorPlace Media, https://investorplace.com/2014/11/market-sp-500-hyg-tvix/.

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