The past four weeks have been an absolute snoozer for the stock market.
After the broad indices had finally retraced most of their losses from the springtime highs, they've virtually flat lined for nearly a month.
Trading volume has slowed to the lowest activity of the year, and volatility is at extremely low levels.
In my nearly fifteen years of trading experience, the past four week period definitely ranks as being one of the tightest range-bound ones that I can remember.
It's almost startling to believe -- especially with all the high-frequency trading nowadays -- that the S&P 500 index can be contained within a 2% trading range, even including intraday activity, for nearly an entire month!
S&P 500 index, daily...
S&P 500 Index, daily (one month)...
What's kind of funny about the current market landscape is that, this time last year, markets were going bonkers and the S&P 500 index made several 4%+ moves... in a day! Talk about an extremely opposite trading environment.
The market landscape is indeed a dynamic creature and, unlike the predictable nature of a change in seasons like summer to autumn, the market is on its own timetable.
It's one of the greatest challenges for many individual investors and traders to recognize when the market landscape is on the verge of a shift.And I believe that the time is very near
. In other words, we're likely going to see more trading volume, higher volatility, and wider trading ranges materialize soon.
You see, the next several weeks are loaded with many significant events that should have an impact on the financial markets. In fact there are simply too many for the market to continue in this range bound pattern.
Consider all that the markets will have to absorb over the coming weeks, starting tomorrow...
- Fed Chairman Ben Bernanke will give the keynote address tomorrow at the Jackson Hole Central Banker Symposium. The market will eagerly anticipate any new signals for more monetary easing. Tomorrow alone could move the markets 2% in either direction
- Two weeks from now, he'll be front and center again at his quarterly press conference after the FOMC releases the latest policy statement. The committee will also release its latest economic forecasts, including their outlook on how far out in time they see interest rates staying "exceptionally" low.
- Next week, all eyes will be on the European Central Bank as they will release their policy statement on September 6. ECB President Mario Draghi cancelled his trip to Jackson Hole citing a "heavy workload," which can only imply that next Thursday should give the markets plenty to digest and should be a market mover.
- The next day, Friday September 7, the August non-farm payrolls jobs report will be released in the US.
- Back across the pond, the German Constitutional Courts will make a ruling on the legality of the permanent European bailout fund (ESM) on September 12. The bailout fund and Germany's participation are absolutely vital to maintaining the current stability in the Eurozone.
- Depending on the outcome, it could prompt Spain (and/or Italy) to formally request aid as a prerequisite for the ECB and Eurozone to intervene in their respective bond markets.
- That same day, the Netherlands will hold general elections. The government fell apart in April after the Prime Minister resigned when he lost support of the coalition government. Like many European countries, the political parties are butting heads over fiscal budgets and austerity measures. The results and formation of the new coalition government will be closely watched by the markets.
- The Troika (ECB, IMF and EU) will head back to the debt crisis' ground zero next week to parse over the accounting books of Greece and assess how the austerity and budget reforms are progressing. The committee is expected to report its findings before the next European summit in October. Without a passing grade, it could mean no more financial aid, disorderly default and possibly an exit from the Euro. Greece has been the catalyst to plenty of volatility in the past, and this development alone can single handedly change the current market landscape.
The bottom line is that, as we look into the near future, it's highly probable that the market landscape is poised to finally make a shift.
And whether we break out to fresh new highs or we pull back and have some sort of selloff, odds suggest that it's going to be a much more intense and bumpy ride over the next several weeks.