After two days of selling on worries about Turkey, the indices managed a decent bounce. The S&P 500 is still down 0.4% from the close last Thursday but the selling pressure relented and many stocks recovered a good chunk of recent pullback. The question now is whether the bulls can build on this positive action.
Unfortunately, recent action suggests that it is going to be difficult for the market to produce a strong uptrend from here. We are faced with slow trading at the end of August, the pause after the end of earnings season, negative seasonality and the potential for negative headlines about Turkey. The market is not concerned about trade right now and the economy seems to be humming along and interest rates continue to be a non-issue.
The tendency of the market lately has been a lack of follow-through. The bears have a couple good day or the bulls have a couple days and then the indices reverse. There is rotation so that makes the indices look better but overall the majority of stocks just aren't doing much.
This action is not a sign of impending doom. On the contrary, it is healthy for stocks to go through a consolidation period when they don't do much. Ultimately that will set up some good formations for better action down the road but it may be a tedious wait for conditions to justify a more aggressively bullish approach.
The best course of action is to focused on managing individual positions. Market timing is not paying off very well in this environment and there is a tendency to make bearish bets when the indices are sloppy and choppy. I believe that there will not be any major shift in the indices in the near term. We will just be bored to death while listening to sensationalistic predictions and bad technical analysis.
There are some good trades to be had in individual stocks. Focus on those.
Have a good evening. I'll see you tomorrow.