The Dow may have fallen more than 100 points on Tuesday, but don't let that minor selloff fool you. The stock market is enjoying its longest stretch of calm since Mel Gibson battled the Brits as William Wallace in the blockbuster film "Braveheart."
During the turbulent days of 2008-2011, Wall Street experienced 1% moves almost regularly amid deep disagreement over the state of the global economy.
But the S&P 500 has gone 47 trading days since closing up or down by 1% or more. That's the longest such stretch since the end of 1995, according to Dan Greenhaus, chief global strategist at BTIG.
In other words, back when Mel Gibson was a respected actor and director on Hollywood's A-list as opposed to being the punchline of jokes.
"Like it or not, we are stuck. Liquidity is light, conviction is low, the weather is warm outside, and people are more focused on watching Luis Suarez bite people than on doing their jobs," Michael Block, chief strategist at Rhino Trading Partners, said in a note on Wednesday alluding to the star player on Uruguay's World Cup team.
The last time the S&P 500 finished the day with a 1% or more move was April 16. Since that point, the market has popped about 5% to shatter more all-time records.
The lack of 1% moves shows that volatility has all but vanished on Wall Street.
The VIX (VIX) volatility index, known as the market's "fear gauge," recently tumbled to the lowest level since February 2007.
CNNMoney's Fear & Greed Index, which looks at the VIX and six other gauges of market sentiment, has been showing signs of Extreme Greed for the past few weeks.
Despite the fact that stocks have rallied during the recent stretch of calm, bearish investors see the low turbulence as a sign that the markets have gotten complacent.
Even Janet Yellen acknowledged the low levels of volatility. During last week's press conference in Washington, the chair of the Federal Reserve said low volatility could even pose a risk to "financial stability" if it fuels excessive risk-taking.
But Greenhaus notes that this level of low volatility is not even close to being a record.
The 1995 streak of no 1% moves for the S&P 500 lasted 95 days.
Greenhaus also pointed to a ridiculous 166-day stretch in 1963 without a 1% move.
That's because the tranquil markets will likely hurt the trading profits of banks as well as hedge funds.
"Volatility is in many ways the lifeblood of financial markets," said Greenhaus. "If prices aren't bouncing around, then there are fewer short term mispricings to exploit."
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
Stocks bounced back Tuesday after their worst sell-off of the year. Gold rebounded as well, following two consecutive days of staggering declines.
It's a good sign that stocks (and to a lesser extent gold) are stabilizing. MOREPaul R. La Monica - Apr 16, 2013 12:22 PM ET
Is the Fed really that powerful? One look at CNNMoney's Fear & Greed Index says yes.
Early Friday, the index surged to 94! That's a record high for the index, with data available since 2004.
The index has been in 'extreme greed 'territory for the past week, as investors have been betting that central bankers around the world would do something to inject life into the sluggish global economy. And boy have MORECatherine Tymkiw - Sep 14, 2012 12:49 PM ET
Investor malaise has settled in like a hot summer day. And it's just as uncomfortable.
"Our volume is as muted as it can be and the VIX is down sharply," said John Kosar, director of research at Asbury Research in Schaumberg, Ill.
Kosar is talking about the Chicago Board of Trade's volatility index (VIX), Wall Street's notorious fear gauge. It has barely budged above 20 during the past month. It is now MORECatherine Tymkiw - Aug 7, 2012 9:49 AM ET
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