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Stock market grows increasingly weird

Stock markets all-time high
Stock markets all-time high 03:19

U.S. equities continued their steady climb this week with the Dow Jones Industrial Average notching its ninth consecutive record close on Monday and its tenth consecutive gain, with further gains being posted in mid-day trading Tuesday.

We've never seen it like this before. And that's a reason to be concerned.

Deutsche Bank's Jim Reid notes that the S&P 500 has moved less than 0.3 percent in either direction for 13 consecutive days. That's the first time a run that long has happened in data going back to 1927. The second longest streak was 10 days, which happened twice: in 1961 and 1966.

Put a differently, it's been 73 trading days since the S&P 500 increased by more than one percent in any one day. If this persists another seven days, it'll break the prior record set between November 2006 and March 2007 -- the end-of-days for the last bull market.

Stocks soar 02:21

Bank of America Merrill Lynch is pointing out the oddities to clients as well, highlighting the fact the Dow Jones Industrial Average recorded its lowest one-month trading range since 1900.

Last summer's doldrums were pretty lengthy as well, so this is a continuation of recent trends: The S&P 500 traded within a 1.8 percent range for 42 consecutive days, the tightest streak in history. The quiet was broken on Sept. 9 when shares fell 2.4 percent on fears over North Korea, Federal Reserve rate hikes and European Central Bank policy.

Amid the quiet, the situation below the surface continues to weaken as buying interest narrows. "Hindenburg Omen" signals have been clustering in the Dow Jones Industrial Average -- due to the weakness of stocks like GE (GE) and IBM (IBM) -- to an extent not seen since October 2000, according to SentimenTrader. Now, the same problem seems to be infecting the Nasdaq.

Over the past week, the Nasdaq has triggered a Hindenburg Omen every day (defined as 2.2 percent of stocks hitting a 52-week high or low near a new high). The streak of six straight days is the second-most in at least a decade. The only others that equaled this were May 17 and June 28, 2007 and August 5, 2015. Both were preceded by periods of intense market weakness.

Stock market milestone 02:00

Another oddity in play right now is the extreme lack of volume: Monday was the first time that the S&P 500 SPDR (SPY), the single most popular ETF in the world, recorded a new 52-week high on the lowest volume in a year when it wasn't around a holiday.

There's just no other way to say it: We are truly in an unprecedented environment. And based on market history, and the tendency for stocks to underperform after similar periods of complacency and quiet, the dangers to investors are high and rising. And many are ill equipped to absorb market losses right now.

Jason Goepfert at SentimenTrader notes that investors' "loss cushion" has never been lower, referring to aggregate cash levels held by six different populations of investors. The allocation of holdings in cash is the lowest in more than 35 years, according to his data, with only February 2000 showing a similar dynamic to now.

Goepfert warns that "investors might not have a lot of tolerance for declining prices since they are nearly fully invested in historically overvalued stock and bond markets." An environment of market calm, easy gains and ultra-low interest rates will do that to people. 

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