A stock market on the road to nowhere

The US stock market sometimes seems like it is trapped on some sort of cosmic hamster wheel.

The market has been range-bound for most of the year.

As we head deeper into the dog days of August, here are a couple of things to consider.



The S&P 500 Index is approaching yet another milestone, according to Bespoke Investment. It’s just not one that is welcome.

As of August 5, the S&P 500 has bounced above or below its 50-day moving average (DMA) about 31 times in 2015.

Here’s a chart that places this trend in historical context.

Source: Bespoke Investment Group

As you can see, the S&P is likely to surpass the 50-DMA crossover record set back in 1993 by the end of the year unless stocks breakout of the limbo they’ve been in.

Market Breadth

Another worrisome sign is the market’s lack of breadth.

In other words, only a handful of stocks as of August 5 are really powering the market in positive territory this year.

This next chart highlights the year-to-date return of the 25 largest stocks in the S&P 500 based on market cap.

Source: Bespoke Investment Group
Source: Bespoke Investment Group

These 25 large caps are up an average of 5.7%–outpacing the average 1.7% return of the other 475 companies that comprise the overall index.

That’s not a sign of a robust market.

Dog Days

What are the chances of snapping out of this stock market funk this month?

Not great, if history is any judge.

Source: Bespoke Investment Group
Source: Bespoke Investment Group


The 6-year-plus bull market is showing signs of fatigue.

The market is range-bound and heavily reliant on a select group of big cap stocks.

It’s not impossible to make money in a market like this.

But it surely calls for a keen eye for value–or stocks that look likely to be bought out as low interest rates fuel deals.

Good hunting.

Continued learning: The trouble with America’s stock buyback binge
Photo Credit: Daniel D’Auria via Flickr Creative Commons