The Calm Before the Storm? Here's How to Prepare for What's Coming

Don’t let this “boring” market lull you to sleep.

It’s making too many traders complacent right now. And complacent is the one thing you can’t afford to be as a trader. That’s because the stock market’s biggest moves often come when everyone’s guard is down.

That’s right– boring can get exciting real fast.

And as you’ll see, the market could be on the verge of a major move…

Look, everyone’s getting bored of this market. Heck, I’ll admit to a sense of frustration over this market chop so far this year. Even Wall Street’s big dogs are getting bored this summer.

Yeah, summer isn’t he most exciting time to be on Wall Street. You’re supposed to take your helicopter to the Hamptons—not sweat through your shirt at the trading desk. But trading isn’t just seasonally boring right now. It’s getting historically boring.

According to data from Goldman Sachs, most traders haven’t seen an environment like this in their career… ever. Oh, and you ever need a boring explanation that details just how painfully boring things are getting, Goldman delivers:

“This week our Sentiment Indicator reads 42 on a scale from 0 to 100, its ninth consecutive week between 30 and 60,” a Goldman Sachs strategist writes. “The steady, neutral reading confirms the signals conveyed by low trading volumes, the AAII Investor Sentiment Survey, and client conversations, which all suggest the current equity trading environment is ‘boring.’”

The birds have stopped chirping, like before a storm. Things are quiet. Too quiet. Could a big move be in the works?

Let’s see if the charts offer any clarity…

Hmmm. Nope, not really. Looks pretty boring actually. While 2013 gave us rip-roaring gains, not much can be said about the past 18 months or so.

But that doesn’t mean it’ll be this way forever…

We follow the charts around here. We don’t go on “hunches.” But that doesn’t mean we can’t notice when things get unusually quiet. We’re not robots here. Ya know?

As Arthur Hill of asks, “Is this the calm before the storm?”

I wonder the same thing.

Art continues: “Will the storm be bullish or bearish? Truth be told, nobody really knows. There are some weak spots in the market, but the bulk of the evidence remains bullish. I will simply adhere to the bigger trend, which is up and favor further gains, however boring they might be.”

That’s the best we can do right now. Even though it’s been boring, the market’s still bullish. Keep that in the back of your mind as the new week begins.

Bottom line: Be prepared. I think the stock market is lulling a lot of folks to sleep right now—and that’s usually a sign a big move could be in the works. Could be up, could be down. It’s impossible to predict which ways things will break. But we can prepare to act if and when we get a signal.

Keep your finger close to the trigger this week. This summer might not turn out so boring after all…


Greg Guenthner
for The Daily Reckoning

The Daily Reckoning