"Most people do not listen with the intent to understand; they listen with the intent to reply."
-- Stephen R. Covey.
The big question for market players this week is whether news events will have an impact on the market. There is little market reaction to another terrorism event in London, and oil is barely budging on a political spat in the Middle East.
There are a number of other headline events on the agenda, including the U.K. election, testimony of former FBI Director James Comey before Congress, economic data and a Fed interest rate decision next week.
While there have been plenty of news events recently, the market has been indifferent to the headlines. One of the biggest challenges for traders is that it has been nearly impossible to anticipate market moves based on macro events. They simply haven't mattered to this market.
One of the main market themes lately has been a focus on price action above all else. Despite the great disdain for President Trump in some quarters and a variety of political and economic events, the market has shrugged it all off and has kept plugging away.
Not only have the big-cap FANG names maintained their strong uptrend, but last week there was a resurgence in small-caps. The Russell 2000 ETF (IWM) has been lagging recently, but the action there improved quite a bit last week. Financials have been weak, but the rotation into the smaller, more speculative names, was a nice change for the bulls.
Some market pundits dispute the argument that the market advance has been narrowing, but all you need to do is look at the percentage of stocks in the market that trading under their 200-day simple moving average of price. At the close on Friday, about 43% of stocks were under that level. That means they have done nothing for over six months. These have been smaller stocks, so they don't have as much influence on the market-cap weighted indices, but it confirms that idea that if you aren't picking the right stocks, you are going to lag the indices.
What many market players and pundits have missed is that a large part of the market has already undergone corrective action. While they are focused on the major indices, which are hovering near all-time highs, a large group of stocks have already been in a bear market and may be showing signs of recovering now.
That is the dilemma for market players. The indices are in an uptrend and at all-time highs, but look like they are extended and may need some rest. On the other hand, much of the market has already had a substantial correction and may already have found some decent support.
It is two very different markets, but what the media and most people see are the headlines that celebrate all-time highs and nothing else. The best solution is to stay focused on stock picking and not waste too much time trying to figure out the indices. They are not providing much clarity about the overall market character of the market.
This morning, the indices are close to flat in the premarket. Players are so used to buying a pullback on terrorism news that we never even have a pullback in the first place. There is no emotional selling on such events anymore.
The main focus is on price action and trying to keep pace with the indices. There is little if any concern about being caught in a market reversal. News events have no influence, so why would we sell on any headline, if no one else is? That is the story of this action.
Meet the Millennial Media Moguls
Planning to be in New York on Tuesday, June 13? You're invited to join us for an evening of cocktails and conversation with three dynamic young CEOs whose companies have found big news audiences and good markets. How have they done it? What have they learned? Meet Chris Altchek, CEO and co-founder of Mic; Shafqat Islam, co-founder and CEO of NewsCred; and Kathryn Minshew, the CEO and co-founder of TheMuse. Our panel discussion will be led by Ken Doctor, media analyst and columnist for TheStreet. The event, from 6 to 8 p.m. is free, but space is limited and reservations are required. Please click here to RSVP and get more information.