QOTD: The Narrowest Trading Range in History

As the summer begins to wind down, the battle between the Bulls and Bears has never been more evenly matched.

The SPX closed higher last week, marking six consecutive weeks alternating between gains and losses. It remains in the narrowest trading range in history, and as a result, the SPX's weekly Bollinger Bands are as narrow as they have been in over twenty years. We took a look back and found only two other periods since 1928 when the SPX's bands were this narrow (1966 and 1993-1994). Average and median returns looking out one week to one year underperformed, particularly in 1966, which marked a cyclical and secular peak. The SPX also has not registered a 5% pullback all year.

Since 1928, there have only been five years without such an occurrence, and only one in the last 50 years ('95). Yet despite all the reasons for a selloff (the Bad and the Ugly), there is clearly something keeping it from happening (the Good). Until the trading range can break decisively, we recommend continuing to buy relative winners, and sell relative losers.

- Jonathan Krinsky, CMT, Executive Director, Chief Market Technician