The Current Sideways Trading Pattern Could Go On Much Longer

Summary: Long periods where the S&P trades sideways in a range is not unusual. There have been at least 15 similar situations in the past 35 years, about one every two years. Some of these have lasted as long as two years. Most of these have resolved with the S&P moving higher. We've been in a trading range for 7 months; settle in, this could go on much longer.

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Over the past 7 months, the S&P has traded in a range of about 7%. After the high volatility of 2009-12 and then the rapid, uncorrected appreciation of 2013-14, this seemingly tight trading range is being regarded as an anomaly.

Is it unusual? Or bearish?

The answers are 'no' and 'not necessarily'. Over the past 35 years, there have been trading ranges as tight that have gone on for much longer, some as long as two years. Most of these have resolved with the S&P moving higher.

In the charts below, the current trading range is highlighted in green and transposed on prior periods that are largely similar. All of the green boxes are the exact same size.

Starting with the current bull market, the current trading range is almost identical to the one that lasted from January until August 2011. That one ended badly.

The 2004-07 bull market had at least three similar periods. In fact, they lasted almost a year each. It was a very tedious bull market.

The first four years of the vaunted 1990s bull market weren't any different. In fact, the S&P was virtually unchanged from early 1993 until the end of 1994, something to think about if you consider the current trading range to be of excessive length.

The second half of the 1990s saw bigger gains, but between massive runs higher were long periods of consolidation in 1996, 1997 and 1999 (and a 20% correction in 1998).

The 1980s bull market was the same. There was almost no gain from early 1983 until early 1985. After a run higher, March to December 1986 was net flat. The same is true for most of 1988. And for the year long period from mid-1989 to mid-1990.

Long periods where the S&P trades sideways in a range is not unusual. There have been at least 15 similar situations in the past 35 years, about one every two years. Some of these have lasted as long as two years. Most of these have resolved with the S&P moving higher. We've been in a trading range for 7 months; settle in, this could go on much longer.

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