The challenge of trading-range action is that it constantly teases us. One day it looks like things are about to break down and take out support levels and then the next day the worries are forgotten and market players start to anticipate a new uptrend.
On Friday, the market looked miserable -- with poor breadth and few pockets of strength. I even heard some bears whispering about the potential for a major collapse. That, of course, was the setup for an energetic bounce today. Some folks attribute the strength to the Presidential debate. Others say it is because of oil or for other fundamental reasons.
I attribute the action to the same thing that determines most of our action these days -- the computers. It isn't the news itself that drives things, but the way the programs are designed to react to news. A headline like those the Trump video triggers standard reactions, such as buying the Mexican peso or big-cap names such as Apple (AAPL) or Microsoft (MSFT) .
We are constantly jerked around by the next news headline, but none of them are big enough or consistent enough to allow the market to escape the trading-range action. Individual market players have little choice but to focus on stock picking -- or very short-term directional calls. The opportunities for the big plays are very limited.
We have an upbeat tone today, with breadth running very strong -- with over 5,000 gainers to just 1,200 decliners. There are over 300 new 12-month highs, but what is of particular interest is how the big-caps like Apple, Microsoft, Amazon (AMZN) , Facebook (FB) and Tesla (TSLA) , are leading. Small-caps are outperforming on a percentage basis, but it's the leadership that is most impressive. (AAPL and FB are holdings of Action Alerts PLUS and AMZN is a holding of Growth Seeker.)
Like many traders, I've taken some stops recently, and reduced positions in some of the major momentum plays, like Twilio (TWLO) and Acacia Communications (ACIA) . I have no interest i buying stocks that are breaking down like these two. I want to buy them when they are going up and not down. Too many people focus on trying to buy the lows rather than catching a trend. There is no need to catch the bottom tick in order to make money.
I need inventory -- but I actually had stodgy old Microsoft as my top technical buy for today. That sure doesn't make for much excitement, despite all the green on the screens.