If, as the proverb suggests, people who expect nothing are blessed because they’re never disappointed, then most of us were left hurling curses at the market last week.

The bulls, because the major indexes couldn’t build on previous gains. Anyone hoping for a quick and easy path to tax reform, thanks to conflicting Senate and House plans. And even the bears, for the market’s failure to tumble despite the ample opportunity.

And what an opportunity it was. Last Thursday, the Standard & Poor’s 500 index dropped as much as 1.1%, but battled back to finish down just 0.4%. Instead of ending the benchmark’s streak without a 0.5% decline or more, it extended it to 47 days, the longest streak since 1965.

All told, the S&P 500 declined 0.2% to 2582.30 last week, while the Nasdaq Composite dipped 0.2% to 6750.94. The Dow Jones Industrial Average dropped 116.98 points, or 0.5%, to 23,422.21.

Of course, there are plenty more opportunities for disappointment to come. Tensions in the Middle East could continue to rise. Economic data this coming week will have latest inflation readings. Earnings from retail bellwethers like Wal-Mart Stores (ticker: WMT) and Home Depot (HD) are due. And, of course, the ongoing tax saga could continue to swing the market, in what Bank of America Merrill Lynch describes as “tax reform on, tax reform off.”

Even the conventional risk on/risk off trading pattern wasn’t what you would have expected last week. Normally, when stocks and other risky assets decline, bond yields fall and prices, which move in the opposite direction, rise, as investors seek a haven from the selling. And there were plenty of reasons to seek safety last week, including the continued turmoil in Saudi Arabia and fears of a bigger war in the Middle East, notes Steven Englander, head of research and strategy at Rafiki Capital Management.

But there are also plenty of reasons to worry that the Federal Reserve will continue to raise interest rates, which would explain the 0.064-percentage-point increase in the 10-year Treasury yield on Friday, the largest since September. “The up move in bond yields looks like fears that the tightening cycle is beginning, but it’s not really consistent with regional war and oil price concerns,” Englander says.

But who needs consistency, anyway? Remember, the stock market just finished one of the least volatile Octobers on record, while September, rather than living up to its reputation for tepid returns, produced a 1.9% gain for the S&P 500. So would it be any surprise if November—usually one of the strongest months of the year—falls well short of bullish expectations? Hedge funds, says Wellington Shields technical analyst Frank Gretz, appear to have loaded up on stocks to take advantage of the 11th month’s reputation for stellar gains, something he calls worrisome. “Talk is one thing,” Gretz says. “The worry part is if everyone acts on this positive seasonality.”

(Source: Barrons Online)