Rev's Forum: Once Again, the Bear Couldn't Generate Real Momentum

 | Jun 16, 2017 | 7:50 AM EDT
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"To refuse to respond is in itself a response." -- Madeleine L'Engle

The indices had a negative reaction to the FOMC interest rate decision on Wednesday afternoon, but after a gap-down open on Thursday it has reverted to its complacent and flat action. Breadth was weak and the number of stocks hitting new 12-month lows expanded to exceed those hitting new 12-month highs. But, once again, the bear could not generate any real momentum.

The bear's biggest problem since the election last November has been the inability to capitalize on weak action. There have been 10 or so pullbacks since Nov. 7, but in every case support has kicked in quickly and the indices have recovered to make new highs. This has given bulls confidence that all dips are buyable, and that is what they continue to do.

Despite the resilience of the indices, there have been some negative developments lately. The most significant is weakness in the big camp momentum names and the FAANG stocks (Action Alerts PLUS charity portfolio holding Facebook (FB) and Apple (AAPL) , Amazon (AMZN) , Netflix (NFLX) and Google parent Alphabet (GOOGL) ) in particular.

These stocks keep the Nasdaq and other indices near all-time highs, even while the average stock was struggling to hold above its 200-day simple moving average. Only about 57% of stocks are over their 200-day simple moving average, which is one of the reasons this market has not felt that positive, despite the fact that the indices are only a few percentage points off their all-time highs.

What has been making this market particularly difficult to trade is that there isn't any strong reaction to news. The bears were hopeful that worries about the Fed balance sheet would be the trigger for more intense selling and there are other issues, like weakness in oil, the strength in bonds, a weaker yen, the Trump political issues and the lack of new fiscal policy progress, but they just don't have any bite.

It is understandable that the bears are focused on a big-picture narrative that highlights all these problems. It makes sense that the market experiences some corrective action after the long run since the election, but the price action refuses to cooperate. It is almost as if the buyers react to each new negative by making an additional effort to buy.

Today is quadruple witch option expiry, which will likely boost volume. There are some news headlines about the central bank in Japan and a deal to save Greece yet again, but it looks like a mild positive open after some bounce action in Europe.

If you are looking to make a major market call, it looks like it is going to require some patience yet again. There isn't much movement and the news flow has little impact. It's a good environment for making nickels and dimes off minor volatility.



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