"Be happy for no reason, like a child. If you are happy for a reason, you're in trouble, because that reason can be taken from you."
-- Deepak Chopra
Higher oil, bank bailouts in Italy and a big investment by a hedge fund in Nestle SA are providing reasons for a positive start to the week. It doesn't hurt that the end of the quarter is coming up and there is some spillover from the Russell index rebalancing that took place on Friday, but the good mood really doesn't have a reason.
If you looked at the charts this weekend the main thing you probably noticed is that hundreds of individual stocks had a large surge in volume on Friday due to the Russell rebalancing. It also can be seen in the Nasdaq composite, which had its highest volume since the Russell rebalance a year ago. The ETFs are mostly unaffected by this rebalancing.
The other notable aspect of the charts is that the Nasdaq and Nasdaq 100 have regained their leadership roles. After a very ugly day for the big-cap technology stocks on June 9, there hasn't been any major downside momentum. The rotation that was taking place out of the FAANG names abruptly came to any end and we are seeing broad strength this morning.
As one trader commented this morning, "The market doesn't need a reason to be happy or unhappy." That sums up the most notable aspect of the recent market action, which is that it isn't news-driven for long. There are some minor reactions to various things such as oil, the health care bill, Fed comments, economic news, political issues and so on, but the market isn't producing any sustained moves on these issues. They are just short-term trigger points for computer-driven programs.
One of the most frustrating aspects of this market for many pundits and editors lately is that it is nearly impossible to find a causative link between news and price movement. While there is some momentary reaction it dissipates quickly and the market moves on to the next minor piece of news to justify the next hour or two of trading.
While the action has been a bit slow and there is some choppiness and rotation, it does have a positive bias. That situation has been aided by the folks who are looking for weaker seasonality to help trigger the much-anticipated market top, but that still is not developing as many had hoped.
Many pundits have been predicting that disappoint with Donald Trump and his fiscal agenda would produce the long-awaited market top, but that still isn't happening. That top has been predicted since the election and we are still waiting for the price action that will signal that the bears finally have gained a toehold.
We have an upbeat Monday morning and end-of-the-quarter window dressing to keep folks optimistic. The bearish arguments are still being ignored and if you are looking to make some money there isn't much choice but to stick with the long side.