Will the Zero-Volatility Trend in the S&P 500 Continue in June?
The SPY ETF hasn't moved more than 1% in the past 31 days.
A bit more than a week ago, Minyanville's Michael Sedacca and I were instant messaging about a tweet I put up on the lack of a +/-1% in SPDR S&P 500 ETF TRUST (NYSEARCA:SPY).
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Michael asked me to offer up some more comments on this concept. Now the SPY has gone 35 trading days without a down -1% move. The +1% or more move is now at 31 trading days. No wonder the VIX (INDEXCBOE:VIX) has fallen to new lows since SPY has been in this drought. Even Goldman Sachs President Gary Cohn last week weighed in on the lack of volume.
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So June begins with the above streak and a low VIX. Is something about to change? There is probably a good chance. Why? First, the seasonality of June is not a positive one for stocks. The chart is optimized and June has been a weak one since 2009.The correlation on this is high at 0.77 with this year's correlation is high as well at 0.54; 1 is a perfect correlation, 0 is no correlation and -1 is an inverse correlation.
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In June of 2013 there were 10 trading days that saw SPY more down and five of the days saw drops of -1% or more. June of 2012 saw SPY drop on eight trading days of which five were down -1% or more. So to expect the market to motor from here is rather foolish given the history presented in this article.
Since last Tuesday's gap open, the iShares Russell 2000 Index ETF (NYSEARCA:IWM) has closed below its open each day. If it does it again, that will be five days in a row. Currently, the IWM is higher than its open. This number is $111.64.
It is easier to be bullish than bearish, but the above data makes it hard to be excited about the month ahead -- especially if you have broad equity market as opposed to only large-cap exposure.
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