Market Review: S&P Has a Snappy Beginning and End, but Very Flat Middle

 | Sep 13, 2017 | 4:22 PM EDT
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If you exclude the first 10 minutes and the last 10 minutes of today's trading, the S&P 500 barely moved. In fact, it was so flat it may have been a record.

Fortunately, there was some decent action in individual stocks and the buy programs that hit in the last 10 minutes helped produce a record high for the S&P 500. Breadth was very close to even but the 370 new 12-month highs are proof that there were some decent pockets of momentum.

The indices were technically extended after two unfilled gaps the last two days but, as I discussed in my opening post, the strong momentum tends to offset the overbought conditions. Markets this strong tend to hold up extremely well. Bears often think the action is too frothy and that it will produce a top, but that is just wishful thinking in many cases. The conditions for a blow-off top are so extreme that this action does not qualify.

One interesting pattern we have seen quite often this year is how the indices will go dead flat after a good-sized move. Typically, you would expect that a big move would create big reactions rather than diminished volatility, but rather than overacting up and down, the market goes dead calm. It is just another consequence of computerized trading, but it's another obstacle to human traders who would normally feast on swings in both directions.

Some market players will be tempted to start looking for a reversal after this run, but extended markets have a high probability of becoming more extended. Don't be in a rush to jump in front of a speeding train even if you do think it is eventually going to crash.

Have a great evening. I'll see you tomorrow.

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