The indices have been painting a positive picture recently, but it has been a much more challenging market for traders than it looks. The indices have been misleading, breadth has been lagging and there is a high level of choppiness. There are pockets of strength but they have been coming from groups that don't tend to produce sustained leadership such as financials and transports.
The reaction to earnings season has been fairly strong so far even with Netflix (NFLX) being forgiven some of its sins. eBay (EBAY) looks poor Thursday morning following its report, but IBM (IBM) which has disappointed so often is trading up about 3% in the early going and will give the DJIA a boost today.
The trade war issue is bubbling up again as the European Union is preparing a list of counter-measures should the US impose tariffs on European vehicles but a meeting in the US soon could ease the concerns.
More significantly on Thursday morning, China is embarking on some monetary easing to battle its sputtering economy. That is causing the yuan to weaken and the dollar to strength again. Gold, copper and other metals are down on this news.
As I've been discussing recently the big challenge in the market right now is the lack of consistency. Individual stocks are not exhibiting much sustained momentum and the leadership that does exist is coming from lagging groups. Banks and financials have provided a big boost over the last three days and have helped to offset broader weakness.
The FAANG names have not been leading over the past week but they did hold up despite the Netflix blow-up. The report after today's close from Microsoft (MSFT) will provide some insight into big cap technology sentiment.
The action of the indices prevents taking a bearish stance but the difficulties in stock picking are making it hard to make progress. There are a few things that are working but it is narrow and if you aren't fairly fast to flip, the gains can slip away quickly.
My game plan is to respect the fact that stock picking is not working that well and to be selective with new buys and trade them tightly. I have high levels of cash already and have been struggling to put it to work which isn't a bad thing considering the action.
We have a negative start on the way but the dip buyers have been showing up lately and that is all we need to keep the mood positive.