‘Mother of all Shorts’ when Stocks Cave to Reality?

‘Everything feels distorted and unnatural’: Citigroup
On Monday, the S&P 500 index edged down 1.2 points. Over the last three trading days, the &P 500 has moved in a 12-point range, from 2175 to 2187. The index is now down a practically invisible 0.34% from its record close on August 15. Over the past 30 trading days, it had only five daily moves, up or down, of more than 0.5%, according to The Wall Street Journal, ‘equaling the lowest since October 1995.’
And trading volume has fallen asleep – much more so than during the normal summer lull. Even the algos appear to have been turned off for maintenance. Jared Woodard, a strategist at BofA Merrill Lynch, summarized it this way:
‘Last week and the week before, you had to make sure your machine was actually on because it was flashing so infrequently.’
And no one is worried about anything.
The Chicago Board Options Exchange SPX Volatility Index (VIX) – the vaunted ‘fear index’ – spent much of the past two weeks below 12, only a smidgen above the record low of July 2014.
In other words, nothing moves. But something has been moving: Earnings. The wrong way.

This post was published at Wolf Street by Wolf Richter ‘ August 22, 2016.