Watching Pullbacks for an Entry

 | Apr 18, 2017 | 11:15 AM EDT
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Stock quotes in this article:

nflx

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gs

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gs

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jnj

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bac

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amzn

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TLT

Considering all the negatives there are this morning, the indices aren't down that much. We have renewed worries about Brexit due to calls for a snap election in the U.K. and concern about the French Presidential election. In the U.S., we have bonds moving steadily higher which calls into question the Fed's increased hawkishness and predictions of better economic growth.

In addition to the macro factors, we have poor reaction to earnings from major companies such as Netflix (NFLX) , Goldman Sachs (GS) and Johnson & Johnson (JNJ) . Even Bank of America (BAC) , which posted good numbers, is trading in negative territory as the gap-up open was sold.

The dip buyers bought the initial weakness this morning, but quickly flipped into the bounce. There are signs of underlying support, but the action in individual stocks is pathetic at best. There are some buy programs that are holding the indices, but for stock pickers there isn't much at all on the radar.

Breadth is running solidly negative, with about 2,000 advancers to 4,300 decliners. A few big-cap names, like Amazon (AMZN) , are being driving by the indices, but small-caps are pretty lifeless.

What is making this market more challenging is that the corrective action that seems to be developing is being delayed by this weak buying. There is just enough underlying support to prevent a good downtrend from really developing. The technical support at the March lows is still in place, and the dip buyers are still confident enough to jump in on these pullbacks.

One of the most interesting developments is the continued strength in bonds, which can be seen in the chart of the iShares Barclays 20+ Bond Fund (TLT) . With the Fed ready to hike interest rates, optimism about economic growth and some indications that inflation is increasing, there should be some pressure on bonds.

The action in bonds is very similar to what we had in January and February 2016, when the Fed was talking about raising rates but the market was concerned about slowing international economic growth. The market corrected sharply during that period, and we are seeing some signs of the same pattern again.

I'm doing very little new buying right now, as there just isn't much momentum to be found. There are some interesting pullbacks developing, but there isn't enough support to suggest that now is the time to start buying.

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