Stock Market Offering Range Bound Volatility

For five days running, stocks have refused to follow through in either direction from the prior days move.

One week ago today the S&P 500 rallied +2% to close the week at 1906.90. We began this week by retracing most of last Fridays rally to close at 1877.08  Those are the closing highs and lows for the week, with plenty of volatility in between.

Stock Market Offering Range Bound Volatility

Every day we’ve tested those levels while alternating between gains and losses at day’s end.

Stock Market Offering Range Bound Volatility

We even had an “outside” day on Wednesday with a higher high of 1917 and a lower low of 1872.70 before closing within the Friday/Monday range noted above.

Stock Market Offering Range Bound Volatility

While the indecisiveness is striking, so is the persistence of bulls and bears defending such a tight range of support and resistance.

Sure, it’s only been 5 days, but it feels like there’s been a month’s worth of price action in just 1 week. I think the indecisiveness stems from the fact that there are great arguments for both a 50% retrace of the January decline, as well as for a breakdown to new lows where we retest and fail at 1812 and , the intraday lows from 2 weeks ago and October 2014.

The Trading Day Ahead: No doubt the talk of the morning is the Bank of Japan authorizing a move to negative interest rates, if and when they deem the time is right.  How about 2006?!

Away from that we’ll get the 1st look at Q4 GDP at 8:30 and expectations are muted at +0.8% to +1.0%.  We’ll also get the Chicago PMI for January at 9:45 with consensus in the 45.0 to 46.0 range. Last month the Chicago PMI plunged to 42.9 which was the lowest reading since 42.9.

US Equity futures are higher in early trading as stocks have rallied across the Globe in response to the move by the BOJ, opening the door for negative interest rates.

I think that’s a dangerous rational for a rally, but it’s also the last day of the month and it wouldn’t be surprising to see markets push the upper band of this week’s resistance to close the month with a positive tone.

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