When I grew up in Michigan people often would say about the weather, "If you don't like it, just wait 24 hours and it will change." That thinking seems to work well with the stock market lately. The action each day seems to be the opposite of the prior day. It is stormy one minute and the sun is shining the next.
Yesterday, the market gapped up strongly to start the day but then it was doom and gloom into the close, as market pundits discussed Brexit, poor earnings reports and worries that bonds were strong because the economy was so weak. The DJIA barely held support at the March lows. The stage seemed to be set for more selling pressure.
Today we have a total shift in the action. The gap-up open saw some minor selling pressure but then the dip buyers went to work and have been driving the indices up all day. Breadth is robust, with nearly 4,900 leaders to 1,750 decliners, and momentum has picked up, as over 275 stocks are hitting new 12-month highs. Whatever worries there were yesterday, they seem to be completely forgotten today.
The indexers and buy-and-hold folks are happy to see this action, but for traders it is quite challenging. If you took heed of the poor price action yesterday, the likelihood is that you are underinvested today and having a hard time putting capital to work. It is even more challenging when you consider that the market has a pattern of reversing what it did the day before. Trusting in sustained momentum has been costly lately.
We'll see how well the indices hold up this afternoon, but the bulls are feeling some relief. Whether that converts into further buying and better momentum is the question -- and if you have been paying attention to the market inconsistency lately, you should have some doubts.