After a strong four day run, momentum slowed Tuesday afternoon and the indices are flat in Wednesday's early going. Chinese markets gave back some of their gains from yesterday and there isn't much movement in Europe, currencies or commodities this morning.
Another round of tariff wars is taking place with the US producing a list of $16 billion Chinese products that will be hit with a 25% tariff. Officials state they are considering tariffs on $200 billion more. The Chinese have retaliatory duties pending on about $110 billion of US products.
The market hasn't cared much about trade war issues lately and continues to look indifferent to the issue. The main focus has been on good earnings news. About 80% of stocks have reported so far and there is overall EPS growth in S&P 500 stocks of a very impressive 24%, according to FactSet. Revenues are up around 9.8% over the same quarter last year.
There are still quite a few reports rolling in but they are mainly from small cap names and don't have any major market influence. They do provide some trading opportunities but earnings season is over and we are moving into the doldrums of August vacation season now. The market can be painfully slow in the next couple weeks but that does result in some bouts of volatility at times.
The main issue facing the market right now is that the strength over the past week has pushed things to overbought levels, and some consolidation and rest is needed. There doesn't appear to be any major news catalyst right now - good or bad - driving the action which allows for some intraday volatility driven by buy and sell programs.
I mentioned yesterday taking some index shorts but this is an attempt to hedge some long exposure rather than a prediction of a major pullback. Markets like this have a tendency to stay sticky to the upside and I'd be quick to cover shorts on minor weakness.
It is flat and dull out there this morning which means we will hear quite a bit about the Tesla's (TSLA) 'going private' deal again. It's a great story but battleground stocks like that are more about gambling than intelligent speculation.
We'll see how things develop but right now it is looking like a very slow day.