Rev's Forum: Traders Would Love to Trade In This Vexing Market

 | Apr 20, 2017 | 7:34 AM EDT
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"Waiting for clarity is like being a sculptor staring at a piece of marble, waiting for the statue within to cast off the unneeded pieces."

--Steve Pavlina

Lack of consistency, low volatility, questionable technical support and plenty of big-picture worries are making for a difficult market. The difficulty isn't that the market is falling apart, but that it can't seem to make up its mind.

The bearish arguments are very logical and compelling, but they always are. The problem is that the price action is dithering. One day it ignores the negatives, but then the next day it takes them seriously. Yesterday we saw an example of how the mood can shift during the day. After a good start, despite weak earnings from IBM (IBM) , the indices sold off the rest of the day and closed at their lows. This was the opposite of the prior day.

There were concerns about oil prices, earnings reports, the election in France, the lack of fiscal policy progress and a variety of other things, but the bears can't seem to do much with this long list. They prevent upside momentum from building, but they can't turn the struggling uptrend into a downtrend.

It is a murky and uncertain market and that makes for very difficult trading. Neither bulls nor bears are able to produce sustained momentum and the technical condition of the major indices is quite mixed. Even the indices are inconsistent, with the Nasdaq in much better shape than the Dow Jones Industrial Average, which is struggling to hold its March lows.

Sometimes these mixed and inconsistent markets can be good for stock pickers, but that is not the case this time. The action has been macro-driven, with the headlines pushing stocks to move in coordinated fashion. There aren't any sectors or themes that are standing out. The themes that do seem to occur tend to be negative, such as the pressure on oil and optical stocks that occurred yesterday.

The main reason the Nasdaq has held up has been relative strength in big-cap technology names such as Apple (AAPL) , Amazon (AMZN) and Alibaba (BABA) , but they aren't making much progress. They are simply holding up better than most. (Apple is part of Jim Cramer's Action Alerts PLUS charitable trust and Amazon is part of the Growth Seeker portfolio.)

An additional issue is that the reaction to earnings so far has been poor. Goldman Sachs (GS) , IBM, Johnson & Johnson (JNJ) and a number of financials have traded poorly following their reports. Market players are not in the mood to buy bad news.

It is a very muddled market and that demands that we stay patient and wait for greater clarity to develop. It is very tempting to make a major market call and predict either disaster or a resumption of the long-running rally, but that simply leads to being jerked around.

I admit I've been rooting for stronger emotions and some drama so there would be something to trade against, but the market refuses to cooperate and make things easier. That is the nature of the beast and leaves us with little choice but to take refuge in patience. Vigilance is the key, and at some point the market will give us a better edge. For now, though, it's dithering and not giving us much opportunity.

In the early going we have a reverse of yesterday's close with oil ramping and a better tone of action. The market has been reversing its opening move recently and traders will be contemplating the chances of that happening again.

It's not a great market for trading, but the one great certainty is that it will change eventually.

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