Nothing exciting is happening right now in the stock market --that’s not just an off-the-cuff statement -- I have empirical evidence to prove it. It has been more than 100 trading days since either the S&P 500 Index (SPX) or the Cboe Volatility Index (VIX) hit a 52-week high or low. The last time either of those indexes closed at an extreme was in February, when the VIX spiked above 50 and closed just below 40. Below, I’m looking at previous times we’ve been in this type of situation and what happened going forward.
100 Days Without an Extreme
The chart below depicts the S&P 500 since 1994 with markers showing each time there was a streak of 100 trading days without a 52-week high or low in the S&P 500 or VIX. The last few instances have been during bullish times, but there were also some signals in the bear market of the early 2000s. The good news is there has yet to be a signal at a major market top.
The table below summarizes the returns after each of those signals. It shows some outperformance in the next six months, but then slight underperformance over the next year. Nothing jumps out as extremely interesting, performance-wise. As far as volatility goes however, the numbers jump out. Over the next month, the standard deviation of returns is lower than usual (the second table is used for comparison). By the next time frame, three months later, volatility is back to normal.
A New SPX High Ahead?
Here are the individual occurrences of going 100 trading days without a 52-week high or low in the S&P 500 or VIX. In all but two of the instances, the streak ended with either a 52-week high in the S&P 500 or a 52-week low in the VIX (which typically coincides with a higher market). The red-colored rows are those other times. In those two instances, the streak ended with the S&P 500 hitting a 52-week low.
These streaks don’t usually go too far past 100 days. In five of the eight occurrences, the streak ended within a month and one time it took between one and two months. The signals in 1994 and 2003 lasted for about five more months. Based on this, the odds say we could see a new high in the S&P 500 or a new low in the VIX by the end of the month.