(Bloomberg) -- For evidence it hasn’t been business as usual for the stock market lately, consider a feat of price acrobatics the S&P 500 just pulled off, one with almost no precedent in two decades of trading history.
It’s the index’s recent refusal to deviate from a technical level known as the 50-day moving average, which is taking on historic dimensions. For 17 straight days the gauge has been fluctuating within 1 percent of the level, tying the longest streak since 1995.
While not front-page news, the phenomenon is notable for what it shows about investor psychology. Mostly absent from August was the mechanical upward march that sent equities to 30 record closes this year. In its place was a more typical back-and-forth, arguably befitting a market where valuations are stretched and alert levels are rising.
Stocks fell more than 1 percent on both Aug. 17 and Aug. 10. That had happened only once before since March.
“There is nothing new that drives the market upwards, but also no vivid reason to sell, so people are looking for a catalyst,” said Katrina Lamb, head of investment strategy and research at Bethesda, Maryland-based MV Capital Management Inc.
The S&P 500 rose 1.4 percent for the week and ended August with a gain of less than 0.1 percent, the smallest increase since March though still the ninth advance in 10 months. The Dow Jones Industrial Average added 174 points over the five days, while the Nasdaq Composite Index rallied 2.7 percent to a record.
Investors entering the calendar’s worst month for stocks must decide whether August’s indecision is a sign of worse to come. At 10 percent in the S&P 500, 11 percent in the Dow and 19 percent in the Nasdaq, the three major indexes are already sitting with year-to-date gains that would look impressive if they held through December. Add to that anxiety over North Korea and the debt ceiling, and even bulls may be wondering if it’s worth it to hang on.
September is historically a rough month for U.S. stocks, with equities on average losing about 1 percent, data compiled by S&P Global show. Traders are taking precautions. Put contracts on the largest exchange-traded fund tied to the S&P 500 outnumber calls by 2-to-1.
The outcome of the Federal Reserve’s meeting and debt-ceiling discussions are among events that could push the index lower from its near-record high. Investors including Advisors Asset Management’s Chief Executive Officer Scott Colyer remain undaunted, citing optimism about better-than expected economic growth and robust earnings.
“I see a healthy dose of pessimism out there, but it seems like stocks will go higher before they go lower,” Coyler said. “There will be more tension as everyone will be trying to figure out when is the right time to sell.”