It looked like a meaningless day of action for the market. The indices were a bit soft, breadth was slightly negative and volume was light. Few momentum stocks had upside movement but the number of stocks making new lows exceeding those that were making new highs by a margin of around 3 to 2. The mighty Apple (AAPL) continued to drift lower and small-caps lagged but the momentum screens were green.
The bulls will tell us that the bears are doing a poor job of pressuring this market when they have chance while the bears will tell us that the bulls no longer have any 'juice.' Technically, we are in a trading range and holding key support levels but unable to generate enough sustained momentum to get this market really moving. The bulls are still yammering about how great things are but the indices haven't made good upside progress in a while.
If you are bullish you can find positives, but if you are bearish you can find negatives. There isn't any clear trend, which isn't a bad thing but it can make it very slow when it is August and many traders are finding other things to do.
It isn't particularly good or particularly bad, which means we just keep plugging along and looking for opportunities where we can find them. There is no need to be dramatic or to have strong opinions -- just wait and see how things develop.
Have a good evening. I'll see you tomorrow.
Aug. 4, 2015 | 1:42 PM EDT
Emotions Are Shifting
- Call it seasonality, but the mood of the market is different now.
There isn't much going on on a summer August day. The indices are slightly negative, breadth is slightly positive and there are few movers in either direction, with Apple's (AAPL) weakness the most interesting factor. The bounce that started last week is still in place but it is eroding. Market levels are still above key support but don't have much upside traction.
What is most notable about the market recently is that the emotions that have helped to drive things are shifting. We still have active dip buying and we'll see quick reversals after a bout of weakness, but there no longer seems to be the same aggressiveness. Market players are not acting like they are afraid the market will run away and leave them behind. That has often driven the V-shaped moves in the past but the fear of being underinvested is no longer as palpable.
It has been a mistake to think that the mood of the market is finally undergoing a shift. Some bears have been anticipating a shift for years and have been dead wrong. It may just be a function of seasonality but the mood of the market is different right now. Some bears are seizing on that to make grandiose predictions, but that sort of sensationalism isn't necessary or even productive. What is important is that we monitor price action closely and see if this mood shift starts to manifest itself in weaker action. There are reasons for concern, but the bulls are still holding us up.
Aug. 4, 2015 | 10:29 AM EDT
Not Inclined to Chase Now
- I'm trading small.
Despite continued weakness in Apple (AAPL), Amazon (AMZN) and Google (GOOGL), the tone of the market action is better and breadth is running solidly positive. Momentum stocks are generally acting well with Lending Tree (TREE), Fitbit (FIT), Netflix (NFLX) and Tesla (TSLA) leading the action. Oil and commodities have some bounce, while semiconductors and retailers are laggards.
While the action looks better, there isn't an inclination to chase. There is some appetite for buying but no longer do we have performance anxiety or fear of being left behind. The longer things stay positive, the more it will draw in buyers, but the pockets of hot momentum are so narrow as to be nonexistent.
Market players have grown used to constant underlying support over the past few years so it's a bit of change when the bulls are more tentative. It requires that we be very selective with buys and manage them carefully.
I don't have much new going on. I'm trading small and have not been able to bite into anything. I've sold down some FIT but haven't done much else so far.
Aug. 4, 2015 | 7:14 AM EDT
It's Actually Worse Than It Looks Out There
- Be vigilant or you'll step on landmines.
"It still holds true that man is most uniquely human when he turns obstacles into opportunities."
The first day of a new month typically has a positive bias, as automatic deposits into 401k and various retirement accounts are immediately put to work. Perhaps that is what helped the market to bounce back late in the day after some ugly action in the morning.
Things looked quite bleak for a while, but a late-day recovery and some relative strength in momentum names took the sting out of the negative action. Breadth was poor, as small caps and secondary stocks performed poorly and Action Alerts PLUS charity portfolio holding Apple (AAPL) moved below its 200-day simple moving average for the first time September 2013, but other key big caps help up, and that had the bulls feeling a bit better.
China bounced back overnight, as desperate measures continue to be employed. Brokerages have banned short selling, which helped the Shanghai exchange to gain 3.7%. As most market players are aware, these sorts of policy moves seldom work very well, but China's central planners can't seem to stop themselves from trying to control the stock market.
In Europe, Greece was down for a second day since it reopened. A bounce in oil-related plays is helping a bit as there aren't any big news events driving things right now.
So often in the last five years we have seen the markets find support just in the nick of time and prevent any real damage. We are at that juncture again right now. There has been poor action under the surface, which has been covered up by the indices to a great degree, but technically the indices are holding above some key support levels and the mood is somewhat improved after the late lift yesterday.
We no longer have the Greek drama driving us overnight, the China issues have not had that much impact and there is some hope that oil and commodities may be close to lows. Earnings season continues to slow down and overall has been a net negative. Revenue has slowed year over year and there are only a few stocks that have managed sustained momentum after good reports.
The news environment just isn't offering many positive macro drivers right now, but we do have the very important jobs news at the end of the week, and that is likely to be what determines the next big move.
For now we are in a trading range with a negative bias. There is still support and a few pockets of positive action, but the summer doldrums have kicked in and you have to be highly selective in order to make much progress.
The key right now is that we are still above the lows of July. That is the most important thing from a technical standpoint. It is much worse out there than it looks, as the average stock performs worse than the indices. While the S&P500 is still well above its 200 day simple moving average, only about 38% of stocks are above that same level.
The close yesterday helped sentiment a bit, but we have issues and there is some early softness. This market is not supportive of aggressive buying right now, and there are landmines if you are not very vigilant. There are positives, but nothing compelling. It is important to remain cautious until conditions improve.