an tSionna {05.22.14}

Chart of the S&P 500 ETF SPY showing the great consolidation we've seen in the S&P 500.  Yes I know that other indices and asset classes have taken it on the chin this spring, but the overall market has held up well.  The SPY is up slightly over 2% so far this year.  It has seen one correction of about 6% last winter.  Since then it has spent the majority of it's time trading between 184-190.  SPY is currently at the top end of that range and is overbought by our work.  That does not mean that the index is doomed to decline from here.  It just suggests that on a probabilistic basis this is a higher risk entry moment.  For all I know the index could see an advance from here.  Stocks can stay over bought or over sold for long periods of time.

Based on the correction last winter,  SPY has spent much of the last seven months  trading between 174 and 190.  That is about a 9% range.  However that range has narrowed since February.  We've now traded between 184-190 since February 24 with the exception of one slight dip in April.  That's a range slightly above 3%.  

Investors tend to be complacent about this type of chop.  Traders hate it because volatility collapses and there is no clearly defined trend.  I'm of the opinion that we've been in the process of digesting that huge advance last year.  The good news if you are fully invested is that we've seen no large decline in the markets.  The bad news for the "buy the dips" crowd is that the market never dips.  

And we're not even to Memorial Day yet!