Market calm has eerie parallels to pre-swoon August

Stocks haven't done much in a while. Wednesday marked the eight-straight day that the S&P 500 had closed less than 1 percent above or below its prior closing price.

Ominously, the last time the market staged this long a period of quiescence was in early August — shortly before stocks took a gut-wrenching tumble.

Now, as then, "we are at a precarious position," Erin Gibbs of S&P Investment Advisory said Wednesday on CNBC's "Trading Nation."

"We're trading at fairly high valuation and earnings growth doesn't look that good, so any big shocks — disappointment from China, any movement from the Fed — could send us into those highly volatile markets once again," Gibbs said.

As the market has slipped into a period of calm, the amount of volatility expected over the next 30 days — as measured by the CBOE Volatility Index, or the VIX — has fallen dramatically.

In fact, on Monday, the VIX closed below 14 for the first time since Aug. 18. That's the day before the start of the August swoon.

Of course, it would be absurd to predict a market drop merely on the basis of a decline in volatility. As the past few years have shown, low-volatility periods can last for extremely long periods of time. In fact, the S&P failed to rise or fall 1 percent or more in 26-straight sessions stretching in late 2014.

Yet as recent history reminds us, it's also a mistake to think that just because stocks have done little lately, a big drop can't be just around the corner.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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