"You can't do big things if you're distracted by small things."
Tuesday the market saw yet another day of very little change in the indices. The S&P 500 declined 0.1%, The Nasdaq was up 0.3% and the Russell 2000 ETF (IWM) was almost unchanged. Breadth was positive overall but negative on the New York Stock Exchange.
Market players had been hopeful that a slight surge last Friday afternoon would help generate some momentum. But, as the tendency has been lately, the market failed to gain any traction. The biggest difficulty lately for traders is that there just isn't much follow through. There are a few stock picks working -- primarily earnings plays -- but there is very little sustained strength or weakness.
The market would look a bit different if it wasn't for five stocks that make up about one-third of the Nasdaq market weighting. Apple (AAPL) , Microsoft (MSFT) , Alphabet (GOOGL) , Facebook (FB) and Amazon (AMZN) have been the primary reason the indices still are lurking around their all-time highs.
The problem is that these leaders are not leading. They are pushing the Nasdaq to strongly outperform, but they are not pulling along the rest of the market with them. Rather than motivate buying in other stocks, the five big-caps have sucked up the liquidity and created rotation out of other names.
Indices can advance on this sort of narrow action for a long time, but eventually if the rally doesn't expand the weak foundation of support will cause problems. This occurred back in 2015 and resulted in a dip that summer as well as another correction in early 2016.
This morning there is a little pressure on the indices on headlines that FBI Director James Comey has been fired. This isn't a significant financial event, but it concerns the market because it causes some political distraction at a time when it is hoping that President Trump's fiscal policy plans will advance at a faster pace. The market is still hopeful that tax policy will be implemented sooner rather than later, but events such as this give the political opposition more ammunition to use to delay fiscal measures.
Is this event the catalyst the bears have been looking for? Probably not. The nature of the market lately is that dips are bought and rallies sold. It isn't just the bulls that are struggling to gain momentum. The bears are even more inept in generating a sustained move when given a chance. Dip buying is still the reflexive reaction of this market to any weakness.
My game plan remains the same. I'm not going to try to predict which way this market will break out of this lethargic state. I'll wait to see which side finally can gain some momentum and act accordingly. In the meanwhile I'll focus on some individual stock picking. There are some movers out there, but if you aren't highly selective it is very difficult.
Cocktails & Cramer
Join Jim Cramer on May 23 for an exclusive party at Bar San Miguel, his Brooklyn tavern. You'll get to watch a screening of Mad Money, after which Jim will arrive fresh off of the CNBC set to mingle, pose for photos and answer your investing questions. Participants will enjoy dinner, drinks, an autographed copy of Jim's book Get Rich Carefully and a one-year membership to Action Alerts PLUS, Jim's club for investors. (Current AAP members will receive one extra year of membership for free.)
When: Tuesday, May 23, 6 p.m.-9 p.m. ET
Where: Bar San Miguel, 307 Smith St., Brooklyn, N.Y.
Cost: $375 per person
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