Narrow Action and Low Volatility Are Making It Hard to Trade

 | May 09, 2017 | 10:46 AM EDT
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Stock quotes in this article:

aapl

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amzn

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googl

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tsla

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FB

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w

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wrld

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nvmi

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lnth

The "if you can't beat them, join them" trade continues to dominate the market action. Money is pouring into Apple (AAPL) , Amazon (AMZN) , Alphabet (GOOGL) , Tesla (TSLA) and Facebook (FB) because that is the only thing that is working. Where else can you put your money if you want relative performance? Small-caps are lagging, the S&P 500 is dead flat and there is no hot sector action. You either buy these big liquid names or you sit on the sidelines and root for a market correction.

The overall market action is not bad. The indices are all fairly close to highs, and breadth has improved today to around 3,300 gainers to 2,800 decliners. There are over 300 stocks hitting new 12-month highs. There are some runners on earnings, like Wayfair (W) and World Acceptance (WRLD) and Nova Measuring (NVMI) .

Selective stock picking is working, but it is the narrowness of the action -- and the lack of volatility in the S&P 500, in particular -- that is making it challenging. The temptation in a challenging market is to take a bearish stance. If you are having a hard time making progress, then you probably have idle cash you'd like to put to work on pullbacks. The longer the indices go without a pullback, the more frustrating it becomes.

I have a few trades going, like Lantheus (LNTH) , which I mentioned on Friday, but I'd like to be more aggressive with a few things and don't see much. In this market you just have to keep on looking for an opportunity to develop.

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