"The news media are, for the most part, the bringers of bad news... and it's not entirely the media's fault, as bad news gets higher ratings and sells more papers than good news."
The stage is set for some market moves this week. Earnings season picks up steam, but the big psychological event will be the inauguration of Donald Trump on Friday. There has been chatter for quite a while now about a "buy the election, sell the inauguration" trade.
The spurt of optimism that the Trump election generated has been losing steam as the news media pound on him relentlessly. There is going to be steady drumbeat of negative headlines, though most economists still see the potential for increased economic growth if the Republicans can push through some of their tax policies and infrastructure spending.
The bears argue that the market has overestimated how easy it is going to be for Trump to deliver on his promises, and that is basically why the "sell the inauguration" trade is gaining some traction. When a trade like that is anticipated, it tends to be priced in quickly as market players try to stay one step ahead of each other. That is the cause of some of the weakness that we are seeing this morning.
Donald Trump also is giving the market another excuse for selling off as he commented that the dollar is already "too strong." Many market players already are worried about the potential for increased volatility in reaction to Trump's comments and this sort of thing confirms some of the fears.
Another item that is impacting markets this morning is that U.K. Prime Minister Theresa May will be speaking about how Brexit likely will take shape. The pound has been weaker in anticipation of her comments that she wants a fast and clean split from the European Union.
All this news flow comes at a time when the indices have been in a tight trading range and are in position for a potential new trend. The Dow Jones Industrial Average over the past 30 days has traded in a range of just 1.07%, which is tightest in history. We hear so many market stats that it is easy not to appreciate them, but this one is rather remarkable to consider.
There is an old market saying, "the longer the base, the bigger the move," and that is why this is such an interesting set-up going into a week with so many potential catalysts. The bears have been growing much louder lately and they wait for the Trump election to falter. Earnings add the potential for more volatility and the movement in currencies is going to be a strong driving force as well.
We have strength in oil and precious metals this morning, but more comments about drug pricing are hurting biotechnology. It has been very choppy trading lately and it looks ready to continue this morning with a soft open on tap.