The Only News That Matters Is That It's the Dog Days of Summer

 | Aug 10, 2018 | 6:45 AM EDT
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The most important news impacting the stock market today is that it is a Friday in August. Earnings season is over, vacation season is in full swing and the recent market action has been choppy and inconsistent. There just isn't much motivation for market participants to do much right now.

We have the usual groups of bullish cheerleaders and bearish skeptics telling us why they are right about what the market will do next, but the market doesn't much care. It is drifting around randomly and causing frustration for traders that are trying to catch some decent moves.

The primary dilemma this market presents is that the indices are trading near their all time high yet the momentum has been tepid at best. Rotation and some good reactions to earnings has keep the Nasdaq in positive territory for eight straight sessions now but it hasn't felt like a booming uptrend.

On the last three trading days there has been a bout of selling late in the day to cool things off but the bears can't seem to find any bad news on which they can build a narrative that hurts the market. The trade war issue just won't gain any traction despite the best efforts of the bears to paint a picture of potential disaster.

The best positive that the bears have going for them is negative seasonality but that can backfire as there seems to be an inclination for some 'don't short a dull market' algorithms to periodically squeeze the market when it looks particularly dead.

The best course of action in a market like this is to embrace the fact that we are in the middle of the dog days of summer and that the action is unlikely to offer many good opportunities. This sort of action will eventually lead to a new crop of trade setups, but we must be patient and let them develop.

My primary efforts right now are focused on identifying stock that I think will setup into third-quarter earnings season. I want to look at stocks that have had great second quarter reports and look to be on the brink of producing accelerating sales and profits. I'm interested in high growth rather than cheap values.

I will take some positions in the names that look most interesting and then look for opportunities to build them as they develop. Since I believe it likely we will see a sharper market dip in the next couple of months I'm not inclined to hold large positions.

I continue to look for shorter term trades as well but, in this environment, they are not as many and they are not working as well. That isn't unusual for this time of year and I'm not going to force things just for the sake of staying busy.

We have a weak open this morning as overseas markets were under pressure due to worries that Turkey's problems may start to have a wide impact on Europe. A strong sell-off would probably be a positive but it does not look like the bears can generate sustained pressure.

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