For a while on Monday morning, it looked like the historic tendency for a positive action on the first trading day of July might not hold. The action started off slow and mournful -- but some positive comments about trade, and news that German leader Angela Merkel had cut a deal on migrants, gave buyers some reason to jump in.
By the end of the day, the indices managed small gains and breadth was close to even. It wasn't a spectacular performance, but it illustrated how there has been consistent support despite continued negative news about trade wars, tariffs and political matters.
FAANG stocks -- Facebook (FB) , Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX) , Nvidia (NVDA) and Alphabet/Google (GOOG) , (GOOGL) -- were a safe haven, and software stocks did particularly well following news that Dell was looking to do something with its VMware (VMW) stake. FB, AMZN, AAPL, NVDA and GOOGL are holdings of Action Alerts Plus.
Oil was under some slight pressure yesterday on news that President Trump is pushing for increased production to help keep prices down, but it doesn't look like supply can be that easily increased and oil is perking back up.
This morning, there isn't much new on the trade war front, and with Angela Merkel working out her political problems, stocks in Europe are up and the euro is actually gaining on the dollar for a change.
The day before the Fourth of July holiday has a history of positive performance and traders are already anticipating some upbeat movement. Quite often, what we see during these half-day, pre-holiday sessions is some increased speculation in small-cap names. The holiday trade is often self-fulfilling, as traders produce some pockets of action simply because that is what they have done in the past in front of a holiday.
We don't have any major negative news, the mood is upbeat and history favors positive action. That should make for a positive day, but it won't do much to change the bigger picture -- which is not nearly as positive.
One of the easiest ways to see that there are problems under the surface of this market is that there were over 260 stocks hitting new 12-month lows yesterday, while only around 85 were making new highs. That is not something that you see in a healthy market.
Enjoy the holiday trading today, but keep in mind it is just one day -- and overall market conditions are problematic. This is a market for some quick trades rather than long-term bullishness.