After the extreme break in the S&P 500 on October 10th, the markets have been trading in mostly sideways.  Sure, there was follow through on the 11th as you can see in the chart below, but since then it has not continued the break.

During the 7-day consolidation period, volume and volatility have slowed markedly.  If the S&P 500 wasn’t going to crash, this is normal. But how long will it last?

Looking at this week’s calendar I can see a few days that could reignite the flames of volatility.  On Wednesday there are several reports that could do the trick, starting with the PMI Flash Composite report (inflation), then a housing report, and ending with the Federal Reserve’s Beige Book in the afternoon.  The latter is an overall report on the health of the economy based on Fed bank regions.

Weekly jobless claims “may” affect the market Thursday morning, but the main report of the week should be Friday’s GDP data.  The prior report showed GDP growth of 4.2%, while Friday’s is expected to come in at 3.3%. How will traders respond to this?

Outside of the data, however, there are always other possibilities that can increase the volume and volatility – like China.  Sunday evening saw a weak trend in the US futures markets, until the Chinese government announced a strategy to help its economy and boost its markets.  When their market strongly rebounded, so did the US futures markets that set up a strong open for our markets. This is the sort of thing that can affect our markets that are out of our control.

What will be worrisome to many coming into Tuesday morning is: “How did the futures move?”  Why would that matter? Because Monday’s early rally that was set up by the Chinese statements (more QE) did NOT last; the S&P 500 and the Dow both closed lower.  If that continues Monday evening into Tuesday morning…the selling of the 10th may have resumed.