Inconsistent markets make for difficult trading -- and this one is extremely inconsistent. Yesterday, the indices gapped down and then traded higher all day. Today, they gapped up and have been trading down all day. At the moment, the S&P 500 is close to flat for the last couple of days -- despite the gyrations.
Although the intraday uptrend yesterday, and the positive gap this morning, had bulls feeling better, it didn't do much to change the negative technical pattern that has been developing. While the S&P 500 has regained the technical support over 2120, it is still a very precarious pattern.
What is more troubling about this market is that there are a number of negative catalysts piling up. News just hit that the German government is ruling out a bail-out of Deutsche Bank (DB) , GDP predictions are being cut due to today's retail numbers, biotechnology is under pressure as concerns grow about possible price controls if Hillary Clinton is elected and the Fed continues to be confidently hawkish.
The biggest negative I see right now is that so few individual stocks are acting well. For a while, we had some great stock picking -- even though the indices where in a trading range. That has changed over the last few weeks, and I see very little of interest right now. There really are no pockets of momentum to be found. There have been a few small-cap oil names, like Resolute Energy (REN) , and some other odds and ends on the leader board, but no real themes of interest.
The fact that individual stock picking has dried up is confirmed by the underperformance in the small-cap indices. When we do have upside, it is being driven by money flow into indices and some bigger-caps. That is what happens when the bulls are short term -- and many driven by algorithms.
My game plan right now is to do nothing. I have already sold what I intend to sell and have substantial cash on hand. I'll keep looking for opportunities, but in view of the way the indices are acting I don't expect to find much right now. Time will change that, and if we stay patient I expect some great trades to develop soon.