History Says A Big Move Is Coming For Stocks

| About: SPDR S&P (SPY)

Summary

Stocks have been in a box for almost three years.

What can we learn from history?

What typically follows long-term periods of consolidation?

What Can We Learn From Last Three Years?

The chart of the NYSE Composite Stock Index (NYSEARCA:VTI) below shows equities have been indecisive since the second half of 2013.

The lack of sustained progress in either direction tells us the battle between the bulls and bears has been fairly evenly matched.

1993-1995 Bullish Example

A similar indecisive period took place in the mid-1990s.

Periods of consolidation are often followed by big moves once the market "breaks out of the box." In the 1993-95 case, the resolution in stocks (NYSEARCA:SPY) was to the upside.

2006-2008 Bearish Example

A similar period of indecisive investor behavior took place between the fall of 2006 and summer of 2008.

Harder markets are typically followed by easier markets. In the 2006-08 example, the easier market produced a strong and discernible bearish trend.

S&P 500 Moving To 2,340 or 1,680?

This week's stock market video examines the current period of indecisive investor behavior, including some visuals on what a break to the upside and downside might look like.

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.

Video

Video

Big Moves Can Go Either Way

When we are in a period of long-term consolidation, it often feels like the market will never break from the range. While anything is possible, history says we should have contingency plans in place for a shocking push higher and an alarming crisis-like plunge.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.