"The only thing I knew how to do
Was to keep on keepin' on like a bird that flew."
-- Bob Dylan "Tangled Up in Blue"
As we wind up the week, the indices look poised to continue their trading range action. Strong earnings report from Microsoft (MSFT) , Paypal (PYPL) and KLA-Tencor (KLAC) are helping, but General Electric (GE) missed estimates. Oil is steady, but a stronger dollar is causing issues.
Market players are still waiting for significant news that will pop the market out of its long trading range, but nothing in the headlines is producing sustained momentum. The economic news has been mixed, and that has resulted in a lack of clarity from central bankers. While the Fed is very likely to raise rates before the end of the year, the rest of the world is still dealing with deflationary pressures and is in no hurry to make hawkish moves.
The tendency of many market pundits is to make predictions about how this trading range is going to resolve itself. It is an easy thing to do and can make for an interesting column, but it is of little value to market participants who are trying to make money. Predictions about where this market is headed may sound smart and insightful, but the only way to really make some good money is to keep on slogging away and then react as conditions develop.
It is human nature to look for simple solutions and in the stock market there is nothing simpler than making a big call and then waiting for it to occur. It is inevitable that the market will eventually move in the direction that is predicted, but what isn't as inevitable is that you will make money. Timing is the key, and that is the major drawback of all market predictions. If they don't have the timing correct, then the chances of making money decline significantly.
The only effective way to deal with this trading range action is to keep on slogging away day after day. Trading isn't a sprint, it is a marathon. You will have good days and bad days, but what matters most is that you stick with it and keep looking for opportunities. If you don't understand that there will be long periods of time when you don't make much progress, then you will likely miss out when the opportunities do start to develop. The most successful traders are those that work at it steadily for long periods of time.
There is no question that the trading range action we are dealing with right now is frustrating. There is limited opportunity for both market timers and stock pickers. It is tough to find tradable setups with momentum, but it is just plain ridiculous to try to predict market direction right now.
We have a slightly soft open as the market digests news and awaits a couple of Fed speakers, more earnings report and news on the oil front.
The best advice of the day is: "keep on keeping on".