The opposite of love is not hate, it's indifference. The opposite of art is not ugliness, it's indifference. The opposite of faith is not heresy, it's indifference. And the opposite of life is not death, it's indifference." --Elie Wiesel
Nothing makes trading more difficult than indifference. Strong emotions create strong moves, and that is what traders need in order to make money. Indifference creates slow and random market movement and provides little opportunity for aggressive action.
The bears keep telling us there are plenty of reasons to dislike and distrust this market, but that simply has not been reflected in the market action. We've had a couple weak days recently, but the downside action has been well-contained as the dip-buyers have stepped up and held us steady. The big problem with the market is that, while the action is positive, there just isn't very much energy. Volume slowed dramatically Monday. We have a few pockets of action, and there is a good supply of stocks at new highs, but there is no strong emotion really driving things.
In an environment like this, it is very tempting to start anticipating the next big move. Traders have a bias toward action, and if there isn't much movement, we often start building positions just to stay busy. There is nothing wrong with accumulating stocks you like, but our judgment can be impaired when we are bored with the action and are just looking for something to do.
The good news is that dull action, like what we are seeing now, is a good setup for strong moves down the road. Traders will be ready to pounce as a new trend looks to be starting, and they will help to push the action once it starts.
What worries me most about this sort of slow movement is that it works to drive away individual investors who make little progress when things are slow and choppy. We are already dominated by the machines that can profit from moves of a fraction of a penny, and these slow markets make them even more dominant.
There isn't much we can do in this sort of environment other than be patient and stay vigilant. The one great certainty in the market is that conditions will change. The bears believe we'll start running into some political issues again, and many will be focused on the President Obama's State of the Union Address Tuesday night as the tipoff of the next battle.
My best advice right now is: Stay focused on the price action, and don't be overly anticipatory. There is still nothing wrong with this market technically, and while the stock picking is limited, there are still opportunities on the long side.
We have a very quiet start once again, and plenty of tiresome political talk. We'll see what develops.