Sticking near 3,000. U.S. stocks are slightly higher in early trading, as the S&P 500 Index appears set to test the July 26 all-time closing high at 3,025. Despite potential market-moving events, volatility has been largely absent from markets in the past two weeks, with the benchmark index closing within 1% of our year-end fair value estimate of 3,000 the past 11 trading days. Cyclical sectors such as financials and industrials are improving, but the Russell 2000 Index has once again stalled out near 1,600, a level that has served as resistance for nearly a year. Most global markets have bounced as well over the past month, but on a technical basis we would continue to favor U.S. large caps.
Where’s the September volatility? September is well known as one of the worst months of the year historically, yet this month, the S&P 500 is up 2.7% and a chip shot away from new all-time highs. Even more amazing are all the scary headlines we’ve seen the past few weeks, yet we’ve seen virtually no volatility. From the European Central Bank meeting, the Fed meeting, a tick higher in inflation, a historic jump in crude oil, and Middle East turmoil to a big spike in the overnight funding market (better known as the repo market), there have been many reasons on the surface to expect a rocky September. Yet, over the past 10 trading sessions, the S&P 500 incredibly has closed less than .10% from the previous day’s close six times. We will take a closer look at this historic calm later today on the LPL Research blog.
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