Whipsawing Market?

[Tyro]

I've been noticing that between ~11/15/12 and ~3/7/13, the S&P 500 has been in a mostly upward trend. Now, since ~3/7/12 (the past ~3 weeks), it seems to be whipsawing within a fairly(?) narrow range between ~1543 and ~1563 (graph attached).

All I can make of this (gut feeling) is that the markets are uncertain, but I don't have the experience to know if there's anything more that can be gleaned.

Do any of the more experienced folks here make anything of this beyond being "just a blip", e.g. does such a phenomenon have any historical significance? Historically, has this kind of thing preceded a further advance or decline? What about the increased (>double) volume on 3/15/13? Appreciate any insights.

Tyro

 

[rbmrtn]

I think much of the recent weeks is euro/cyprus related. It was down monday, up tuesday, now down today. I don't think a couple of weeks of data can give much indication. '04 spent most of the year consolidating in narrow range.

 

[eytonxav]

Whipsawing This has been the smoothest sailing I can remember in quite some time, feels like the good ship lollypop

 

[EvrClrx311]

in my opinion its next to impossible to get any real trending insight looking at 3 months of data. As an experiment, one could try to look for similar situations in the past rolling over every 3 months period in history. You'll likely find 50% of times where the market was down next, and 50% where it was up.

 

[Lsbcal]

Basically the market is a bit of a random walk. I think of it as (1) new news comes in, (2) prices adjust between buys/sellers, (3) continuous and somewhat unknown and varying feedback loops. There is an element of stock momentum that has been modeled, see: Carhart four-factor model - Wikipedia, the free encyclopedia

It can be amusing to read about simple market models and speculative theories, but getting too serious could be dangerous to one's financial health.

 

[Tyro]

I think much of the recent weeks is euro/cyprus related. It was down monday, up tuesday, now down today. I don't think a couple of weeks of data can give much indication. '04 spent most of the year consolidating in narrow range.

I thought Cyprus has only been about a week, but thanks.

 

[Tyro]

in my opinion its next to impossible to get any real trending insight looking at 3 months of data. As an experiment, one could try to look for similar situations in the past rolling over every 3 months period in history. You'll likely find 50% of times where the market was down next, and 50% where it was up.

I used a 3 month chart to more easily see/illustrate the range/trend, and corrected a typo in my OP. The upward trend actually began back in November.

The reason I asked is that I was hoping someone here may already know/recall similar periods in history, and their results. Sorry, I thought I had made that clear in my OP.

 

[ducky911]

I think that we will get a pull back of some kind but may be short.... there is more good news to come....housing is going up...homebuilders in my area are back to building...that means good job reports....that means more tax for cities....and the buzz will spread and repeat

 

[heeyy_joe]

Market consolidation period. A good run up YTD, kind of like all those people that pile into the gym at the beginning of the year and then things level out by March. Defensive stocks presently in favor. Buying on dips and writing some strategic covered calls....

 

[LakeTravis]

Precursor to "Sell in May and Go Away"? Dunno........ but I've cashed in about a quarter of my after-tax investments over the last couple of weeks, just in case there are any good buying opportunities between spring and fall.

 

[LOL!]

2012 was a year of low volatility, so the recent volatility may seem excessive, but probably is not.

Here are two links about 2012:
Americans Miss $200 Billion Abandoning Stocks - Bloomberg

Daily swings in the S&P 500 averaged 1.74 percent in 2008, the most for any year since the Great Depression. The index rose or fell 1.58 percent on average in 2009, the third-biggest year on record for volatility, while 2011’s 1.24 percent average moves made it the seventh-biggest, data compiled by Bloomberg show. Volatility is down to an average daily move of 0.59 percent so far this year, data show.

And A Really Good Year—Stock Market Wins and Losses of 2012 - WSJ.com

How placid were markets? The volatility of the market for U.S. Treasury bonds was the lowest on record, according to FridsonVision, a New York financial research firm.

I think years of high volatility are also down years (see first quote above). But the recent volatility is not that high and may be lower than average.

 

[audreyh1]

Don't ever expect to have a reliable "gut feeling" about the market. It is highly irrational. People try to "explain" market behavior all the time, but they are just guessing - and usually way off base. Best to ignore the daily noise and weekly and monthly charts.

 

[REWahoo]

Don't ever expect to have a reliable "gut feeling" about the market. It is highly irrational.

But...but...how can I time the market correctly if I ignore my gut feelings?

 

[Dawg52]

I could stand a whipsawing market like this from not on. Just think back 3-4 years ago. No complaints here.

 

[jclarksnakes]

I think it is just flirting with record highs. Companies are seeing good economic signs and putting money they have been holding back into their operations. Some are even buying back some of their own stock. This is causing the nice rise we have been seeing. On the other hand......The last couple of months with new record high in the DOW and getting close to record high in the S&P some people are pulling money out. Net result is the up and down recently. Overall this is very good IMO.

 

[EvrClrx311]

I used a 3 month chart to more easily see/illustrate the range/trend, and corrected a typo in my OP. The upward trend actually began back in November.

The reason I asked is that I was hoping someone here may already know/recall similar periods in history, and their results. Sorry, I thought I had made that clear in my OP.

All I'm saying is that humans by nature try to make sense of data and plots and find patterns that don't really exist. This has been proven in study after study after study. Trust me when I say... if a historical short term pattern exists like what you're asking about, every computer model in the world that deals with investing would jump on it and the results would be that they all stomp out any benefit a person might hope to achieve from it.

Just think of it this way... for everyone who has a guess as to what the stock market might do moving forward based on their own analysis of what its done in the past there is someone else saying the opposite with evidence to support why also. Choosing which one is right is up to you. I'm just here to tell you its a 50/50 guess

There is too much randomness involved... and the market so heavily is influenced by external pressures that have yet to be determined. Someone could really prove that the upward trend will continue through 2013, and maybe all evidence supports it... but then if a Europe collapse gets triggered sparked from an accidental business mistake from one high individual or corporation... or what if Iran decides to test the waters by detonating a nuke underground? What if they waited until 2014 to do it, what about 2015? All things that could dramatically effect peoples actions and confidence in the markets.

 

[seraphim]

It wasn't In upward trend in November, it was a correction after the drop following the election lol.

I enjoy watching the markets, reading and speculating on reasons, even guessing on how events will effect tomorrow's indexes. But, all in all, a couple of months is short term thinking, and as EvrClr stated, there is too much randomness. Investor speculation about events cannot be predicted either, except to assume they will generally move to protect their investments in uncertain environments. But not always.

Will your trend, which I don't think can be qualified as a trend, continue? *shrug* Congress has a few battles coming up nwhich may send investors scuttling back to safe havens. N Korea may follow up on vague threats, Israel may attack Iran...

And showing only part of a graph shows nothing - data on the graph preceding your alleged trend is extremely important in analyzation.

In short - too little information over too short a time to make any kind of significant conclusion, and no way to make any accurate predictions, anyhow.