The market action today is an excellent illustration of the problem traders have faced since the first of March: the lack of sustained momentum.
After some great action on Thursday, it is slow and dreary today. The bulls can't build on the advantage they had established. Breadth is quite poor with 2,280 gainers to 4,100 decliners and most of the stocks that led yesterday such as Universal Display (OLED) and IBM (IBM) are reversing back down today.
This is the fourth time since March 1 that the bulls have produce a solid day of action but then failed to build on it. The bears have also been inept but have done a little better. They still can't take the market under the March lows, although the DJIA has come close.
The big question for next week is whether some of the major macro events will be a catalyst. We have the French election this weekend, the potential for a governmental debt shutdown and quite a few earnings reports.
Over the last few months, the market has essentially ignored the news. Negative headlines such as the failure of the repeal of Obamacare haven't had any major consequences, but the news is starting to matter more. Yesterday, hopes that tax reform may not be delayed for years was part of the reason the market rallied.
The technical condition of the market favors the bears. Although downside support has held quite well, the more often it is tested, the more likely it will fail. It is not my style to be anticipatory, but I can't help but be cautious given the current price action. There are problems and the stock picking has been tough.
The market may shrug off the negatives again and regain momentum next week, but the failure to build on yesterday's strength is an indication that the buyers are not feeling very confident. They have been selling good news and buying bad news, but it's flipping action while everyone waits for a new trend to emerge.
Applied Optoelectronics (AAOI) , which was my stock of the week, is doing well today on news it is being added to an index. Aurinia Pharmaceuticals (AUPH) , which had good data last night, is trying to come out of a base on volume, but it continues to be a difficult market for stock picking.