Range-bound market defies bulls and bears

Many strategists argue stocks remain in a bear market and say they will eventually break below October’s lows. However, optimists believe the S&P 500 bottomed over six months ago, and say subsequent gains of 17 per cent are indicative of a bull market. Who’s right? In truth, no one knows.

For now, it may be best to think of this as a rangebound market as opposed to a bull or bear market. The S&P 500 has been stuck in a relatively tight range this year, between 3,800 and 4,200. As Bloomberg’s Jonathan Levin notes, the S&P 500 has “essentially ping-ponged” around 4,000 for the last 11 months, with over 80 per cent of trading days closing within 5 per cent of that level.

The narrow nature of the advance, coupled with the index remaining 15 per cent below January 2022′s all-time high, means that speculation of a new bull market looks somewhat unconvincing. At the same time, for all the talk of recession and bank failures, stocks held up well last month. Over the last six months, they have not gone near the 3,500 level that marked October’s lows.

Trading ranges don’t last for ever. Eventually, we will see a breakout, but it’s best to keep an open mind as to whether it will be to the upside or the downside.