The mid-July, post Brexit run-up has given way to a mild pullback and… wait for it… another sideways box.

For more than two weeks, the S&P 500 has been virtually stuck in an amazing, maddening range of less than 1%.

This is an almost unheard-of level of inaction.

In fact, I went back through 10 years of data and could not find any other occurrences of a two-week range that was this tight.

This is really strange. But the good news is, it can't last.

Here's what I think will happen…

The Markets Are at a Dead Calm, but Only for Now

To see how unusual this is, all we have to do is look at the data on this chart I drew at the end of last week to see how exceptionally quiet this market action has been. Check out the Bollinger bands, in particular, the dotted line sandwiched between two solids. They're moving closer to the dotted average, which denotes very low volatility, in this case barely 4.5% over the past three weeks:

The laws of probability say that we can't keep this tight, "nowhere" market for much longer.

I'd be very surprised if we were through with the general upward thrust of the past few weeks.

As I said last week – market strength usually leads to more market strength, and this pattern is setting up like a classic "Edwards and Magee" continuation flag.

Robert Edwards and John Magee wrote one of the classic books on technical analysis called "Technical Analysis of Stock Trends" – 624 pages of stock pattern recognition goodness.

If you haven't had the chance to pick this classic up, I highly recommend that you do.

Of the many patterns they identified, one segment of the book is dedicated to continuation patterns – configurations that show up during established trends and traditionally lead to an extension of the trend. And in the chart above, the current setup is a classic.

I said it last week and I'll say it again.

From here, the market needs to get some relief from its overbought condition. This can happen in two ways:

• The market continues in a sideways consolidation where the bears balance out the bulls and put the market back into a more normal condition.
• We get a profit-taking pullback (where traders and investor decide to cash in on some of the profits they've made over the past three to four weeks).

So far, we've gone the consolidation route.

However, I'm still expecting a modest (profitable) pullback before it heads upward once again. Usually, August is a more volatile month on the markets, but I don't think that will be the case for most of this month.

Just like a high-jumper at the upcoming Olympics, sometimes the market has to bend its knees before it jumps higher.

Here's What Will Move These Markets Higher

Right now, there are only so many catalysts in play that have the potential, at least, to snap these markets out of their pattern and send the bulls out once again…

• The Fed is likely to play its usual outsized role in that eventual move up. Last week, it said it wouldn't raise rates at the time, but hinted at a possible hike by September. I think that's highly unlikely and, more importantly, the markets don't expect a hike for the rest of 2016, either. That's generally good news for share prices.
• Crude oil prices refused to give us a better (higher) entry level to play the downside and have drifted down, with concerns about a global supply glut weighing on trader sentiment – and that sentiment means a lot for the price of crude. I'm watching this closely for any opportunities as oil slides closer to "official" bear market territory.
• We're not out of this four-quarter "earnings recession" yet, but, all in all, this season could be much worse. In fact, some of the market's biggest "marquee" stocks, like Apple Inc. (Nasdaq: AAPL), Facebook Inc. (Nasdaq: FB), Alphabet Inc. (Nasdaq: GOOGL), and Amazon.com Inc. (Nasdaq: AMZN), have all made investors very happy with exceptionally strong numbers.

Considering all this, I think we can look for some kind of break in this "tightness" in the next week or so, and I'll be watching closely. It's a safe bet that there will be some market indecision before the new direction becomes obvious, but I think it will be "up." And to new highs, at that.