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222 Days of Consolidation in Large-Cap Stocks

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The S&P 500 has been in a long consolidation period since May 4, 2022. The large-cap index has moved between 4,300 and 3,580 in the last 222 trading days.

The S&P 500 is down 17.9% from all-time highs and up 2.5% year-to-date after falling 19.4% in 2022.


The close of yesterday at 3,936.97 was at the mid-point of the 222-day-long consolidation channel between 4,300 and 3,580.

Even though yesterday’s loss of 1.6% was caused by the Fed’s decision to raise interest rates by 25 basis points, the market isn’t sure where it will go in the medium term. However, it has a small positive bias in the short term.

In contrast to implied volatility, which the VIX index measures at 23.3%, realized volatility (21-day annualized) is 17.5%.

Short-term trading losses are accumulating due to the whipsaw, while theta burn has benefited call and put option sellers. Momentum is also facing losses, with the momentum factor (MTUM) down 7.5% year-to-date after falling 18.3% last year.

Any forecasts, whether based on technicals or fundamentals, are exercises in futility. No one knows the medium-term direction of the market and whether the consolidation will end with a breakout above 4,300 or a break below 3,580. The direction will depend on information not available at this time.

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