August brings remarkably low volatility to the U.S. stock market

The widely followed VIX (Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options) is making lower lows and lower highs. While the Fidelity Spartan 500 Index Fund (FUSEX), our benchmark investment that mirrors the performance of the S&P 500 index, is making higher highs and higher lows.

The current low volatility of the U.S. stock market is in stark contrast to the extreme swings of last August, following the aftermath of the downgrade of the U.S. debt. Also gone is the volatility that followed the standoff with Iran and the Euro debt crisis just in recent months.

As the market is advancing in a seemingly orderly way, we continue to be cautiously optimistic. Our biggest worry is the seasonal weakness that can develop in the fall months of September and October. As shown on the chart below, FUSEX is approaching its overhead resistance. Breaking this level in the days and weeks ahead will be critical for the market to reassert the bullish momentum.


The Fidelity Spartan 500 Index Fund (FUSEX, last change: -0.10%) is making higher lows and higher highs, but a breakout above the resistance level will be needed to reassert the bullish uptrend.

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