The Trading Range is Getting Even Tighter Yet

The Trading Range is Getting Even Tighter Yet

Posted on August 03, 2015

Canterbury Weekly Update

August 3, 2015

 

Market State 2 (5 Days): Long term: Bullish – Short Term: Bullish/Neutral.

 

Canterbury Volatility Index (CVI): CVI 57 - The market’s volatility remained the same as the previous week’s CVI 57. Our data shows that the systemic (market-specific) risk has been limited to a normal market pullback, which is a correction of -5% to -10% during Bull Market States 1 through 5 when volatility is at CVI 75 or lower.

 

The Overbought/Oversold indicator is now 77% Overbought condition (short-term bearish side of neutral). Last weeks mini stock rally was responsible for the 15 point increase in the market’s Overbought condition from 62% Overbought a week ago. The S&P 500 is now in the upper half of its trading range (slightly extended).

 

Market Update:

Last week closed out July on a strong note. The S&P 500 was up 1.2% for the week and up 2.10% for the month. The Dow was up 0.7% last week and is up 0.52% for July. Year to date the S&P 500 is up +2.2% while the Dow is down -0.7%. The 20 year Treasury bond ETF (TLT) is down -1.75% and US Oil -22.32% year to date.

Source: Orion, Morningstar, Bloomberg.

 

Below is a longer term view of the S&P 500. Each bar represents one week’s trading instead of one day. The weekly chart shows less market noise. The trading range, that has been in place for most of the year is clearly a different market environment from last year and 2013 when the S&P 500 was in a steady uptrend with successive higher highs in price and higher lows.

 

You can see the narrow gap between the 10 week (blue line) and 40 week (red line) moving averages. The two lines continue to converge. The volatility is also low as can be seen from the tight trading range.

Source: Stockcharts.com.

 

Bottom Line:

For now, the bulls still have the ball. Narrow trading ranges are typically resolved by a decisive break one way or the other. Things should begin to liven up soon.

Canterbury Investment Management: Tom Hardin

More About Tom Hardin

As Chief Investment Officer, Tom has more than 30 years of experience in the investment management industry and has a broad breadth of knowledge. He is known as an innovator, educator and has been revolutionary in the advancements of portfolio and risk management.

Every effort was used to provide accurate data and mathematical calculations to provide, what we believe to be, accurate results. Canterbury Investment Management, LLC, and its principal owners, make no guarantee of completeness or accuracy of data or calculations as well as conclusions of any statistical data or information contained in the simulation illustrated on this page. Past results or performance is in no way a guarantee of future results.