"Excellence is in the details. Give attention to the details and excellence will come." --Perry Paxton
Technically the indices are acting in a very healthy manner. They are consolidating gains after the big move to new all-time highs following the Brexit decision. The S&P 500 is essentially flat since July 14 and has worked off its overbought conditions.
Despite this positive price action, it isn't easy to embrace this market fully. The biggest problem is that there has been so much significant headline news around the world recently, from Brexit to a coup in Turkey, struggles with deflation and the most disliked presidential candidates ever. I can't recall a time when we have had so much significant news that has had so little impact on the market. There is chaos blaring in the headlines and market players simple shrug.
At some point something is going to matter to the market and will be used to justify a significant correction. Many believe it will have something to do with the central bankers but no one knows what it will be or when it will occur. For now, this market continues to shrug off everything the world can throw at it. Low interest rates are the salve that seems to cure all problems.
Earnings season is another event that isn't having much market impact so far. We had the biggest night of earnings so far this quarter last night and nothing much stood out as exceptionally strong. Texas Instruments (TXN) was probably the biggest positive report while Gilead (GILD) was the biggest disappointment.
Apple (AAPL) reports earnings tonight. That used to be the most significant report for the market but the mighty Apple has lost much of its luster and its days of under-promising and over-performing have long passed. It will still be a very important report for the market but it is now much more a company-specific event rather than a market mover.
Probably the most significant news events will be more central banker decisions. The Bank of Japan is expected to ease policy again this week but there is some concern that they may not do much. The BOJ is desperate to raise inflation to its 2% target but may have to rely more on fiscal policy. A decision is expected on Friday.
We also have the Federal Open Market Committee issuing its latest policy statement on Wednesday afternoon. Once again, no one is anticipating any change in rates but there will be a frantic search for clues as to when a rate hike may occur. It is expected that with the ramifications of Brexit still unclear, the Fed will maintain a dovish tone.
That backdrop has kept the indices pinned down, but good news for traders is that there continues to be good pockets of trading. Nearly 400 stocks hit new 12-month highs yesterday, although breadth was nearly 2-to-1 negative. "Junk" names are attracting speculative interest but some higher quality stocks -- (TXN) , TJX Cos. (TJX) , eBay (EBAY) and Fabrinet (FN) -- are making new highs.
There are a lot of troubling headlines but market momentum and action in individual stocks continues to be good. It won't last forever, so profit from it while you can.
