Tobias Levkovich, Citigroup's (C) chief U.S. equity strategist, summed up today's market action quite well by observing that there is a "stunning" lack of interest among retail investors. That isn't anything new, but the slowness of the trading today was particularly mind-numbing.
What makes it even more challenging is that the action isn't all that bad. The disinterest isn't driving down prices. Computer programs, corporate buybacks and low interest rates keep a bid under the market. Even though sentiment is indifferent at best, we don't correct because there are factors at work that more than offset the fact that the average person just doesn't care too much about the market. Those who do care tend to be invested through indexing, so the short-term, day-to-day action is meaningless to them.
I've lamented many times over the last few years how our rallies are joyless and we never seem to have the sort of excitement that we used to see in the days prior to the Great Recession. That doesn't mean the market action is bad or that a disaster is brewing. It simply gives the market a very different feel and it can be quite slow and boring at times.
It is highly unlikely that the emotional state of the market is going to change until there is some very negative action, but it is a complete waste of time trying to predict when that might occur. We are stuck with a market that keeps going up although there is a "stunning" level of disinterest. It isn't easy to trade, but that means we just have to keep working at it.
Earnings are coming next week, and that should help to liven things up, but we are likely to have another uneventful day tomorrow as we wrap up the week.
Have a good evening. I'll see you tomorrow.
April 9, 2015 | 1:33 PM EDT
Maybe the Computers Are Enjoying This
- · For human traders, market hasn't much to offer.
The indices are off their early lows, but the action is just about as dull as it can get. Breadth has improved a little but is still running negative and pockets of momentum are nearly nonexistent. It isn't very good action, but it is not particularly bad either. If you have a market bias, it is easy to find evidence to support your view.
There is quite a bit of mumbling about how the computer programs are jerking us around. What is ironic is that while the computers do create some movement from which they can profit, it isn't enough for human traders to be active. We end up with movement that is so short-term that only the fastest computers can profit from it. For the casual market player, it is just random noise that is untradeable.
I've often written that bad markets wear you out rather than scare you out. This isn't a bad market, but it is wearing out quite a few traders. It is the computers that are preventing the low-volume fades that you'd normally expect to see when things are this slow.
We'll see what develops this afternoon, but it looks like there simply isn't any interest in doing much right now. There isn't even any news to serve as a catalyst. Be patient and stay selective.
April 9, 2015 | 10:39 AM EDT
Just Stay Patient
- · There is very limited speculative interest.
The market continues in a holding pattern and it is likely to become even more sluggish as bored traders start watching the Masters coverage. Breadth is running slightly negative, at around 2470 gainers to 2700 losers. Oil and solar energy are leading, while precious metals and home builders lag. Biotechnology has rolled over a little, after a positive start.
There are a few pockets of momentum in things like Silicon Motion Technology (SIMO), Express Scripts (ESRX) and TASER International (TASR), but the indices are probing the lows of the day and we have a high level of disinterest. The momentum screens are lagging and small caps are underperforming, which is a sign that there is very limited speculative interest.
The important thing in this market is to just stay patient and not force things. Don't fall into the trap of making big-picture predictions in a market that is doing nothing. Too many folks want drama, which leads to drawing unjustified conclusions from meaningless action.
The market is neither good nor bad and we have to accept that fact and wait for further developments. I'd really prefer to offer some great insight on why things are going to suddenly move one way or the other, but that would be nothing more than a guess driven by boredom.
April 9, 2015 | 6:58 AM EDT
Indecisive Market Sets Up Some Drama
- Earnings season is likely to be a tipping point.
Let go of certainty. The opposite isn't uncertainty. It's openness, curiosity and a willingness to embrace paradox, rather than choose up sides. -- Tony Schwartz
While the overall tone of the market action on Wednesday was positive, the big picture remains quite murky. On Tuesday, the indices closed poorly and the mood was quite dark. But a big jump in China and dismissal of concerns about the timing of the Fed's rate helped to produce a bounce on Wednesday.
There was some better action in stocks yesterday, but it wasn't strong enough to push the market back into a clear uptrend. The trading has been very choppy and sloppy lately and more suitable for intraday scalps than position trades. It isn't bad action, but it isn't good enough to support aggressive buying.
The good news for traders is that this indecisive and rather boring action is likely to set us up for some near-term drama. We have earnings season starting in earnest next week, which is likely to be a tipping point for the market.
Alcoa (AA) started things off last night with a 2-cent beat, but guidance was disappointing and the stock is trading down this morning. Overall expectations for earnings have come down quite a bit lately and some pundits believe they are now low enough to set us up for some positive reactions. We find out starting next Tuesday night.
While we wait for earnings, the market is jumping around on oil, China, Greece and European economic news. None of those issue is positive enough to put the market into an uptrend, but they are providing some excuses for intraday volatility.
The key issue continues to be the Fed's timing of future interest-rate hikes. When the minutes of the last Fed meeting were released yesterday, there was some quick selling as there appeared to be more hawkishness than anticipated, but that was quickly reversed as market players reflected on the poor jobs news that we rallied on this past Monday.
While the market is still a bit nervous over the potential for rate hikes in June, there is growing confidence that nothing is going to be done until later in the year. We are going to jump around a bit as the various Fed members continue to flap their gums, but the data-dependent Fed just doesn't have enough data to start rate hikes any time soon.
There is plenty of news flow for the bulls and bears to debate right now, but it isn't doing much to drive the market. The action is trendless. We have some good support, but not enough buying to create good momentum. There is some trading in China stocks, biotechnology and some other odds and ends, but no major big-cap leadership. Traders keep coming back to biotechnology and solar energy. If we lose those groups, we will be in trouble. But right now boredom is keeping those groups active.
When the market is in a state of flux like it is now, the easy thing to do is to start making predictions about what will come. Pre-existing biases become very clear as the pundits project their emotions on to a market that isn't very clear.
The bears see the choppiness and uncertainty as an indication that a major top is forming and that disaster is hiding just around the corner. The bulls see this trendless action as just a healthy pause before the long-running uptrend continues.
For opportunistic traders, we don't really need to guess. We simply need to monitor the action closely and wait for greater clarity to develop. There is no need for a big-picture thesis or for grand predictions about market turns. The price action is the only evidence that we need. Just watch it and we'll soon have a good insight into the market's intentions.
We have a little early pressure, despite mostly good news overseas. Worries about the Fed are bubbling up, but mostly it is just a market that can't make up its mind.