4 Factors To Consider During This Year's Dog Days Of Summer

The dog days of summer are typically the hottest days of the season, marked by lethargy and inactivity. Lethargic and inactive are two very appropriate words to describe the S&P 500 lately. Since early July, the index has traded in a very narrow range between 2150 and Tuesdays high of 2187. While the market is once again making new highs, its much more of a drift than a breakout.

So far in August, the SPDR S&P 500 ETF Trust (NYSE:SPY) is up 0.8 percent, a far cry from the volatile Augusts the market has delivered in recent years. Last year, the SPY fell 8.5 percent in August, following a 4 percent gain in 2014 and a 4 percent loss in 2013.

It looked like we were in for another summer swoon just a few weeks ago, when the U.K. shocked the world on June 23 by voting to leave the European Union. The knee-jerk reaction to the Brexit vote included a major market selloff, but since that brief two-day dip, four factors have been dominating the S&P 500 trading action:

The Brexit head-fake fooled a lot of traders. Market sentiment has flipped from extreme fear immediately following the Brexit vote to extreme confidence now that the S&P is consistently making new all-time highs.
So far, Q2 earnings season has been solid. Apple Inc.'s (NASDAQ:AAPL) Q2 numbers were especially strong, and the stock is the largest, most commonly-held and most heavily-weighted stock in all the major indexes.
It seems increasingly likely that the Federal Reserve will now delay its next interest rate hike until after the November election.
The surprise turn of events following the Brexit vote has lured under-invested funds to chase the S&P 500 higher and has provided support for the market during any short-term dips.

For now, investors are enjoying the S&P 500s lazy drift higher. But the dog days will soon come to an end, and the big question remains: will the markets next big move be up or down?