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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.

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

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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No positions in stocks mentioned.

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