After flat and dull action on Thursday the indices are showing a little life to finish the week. The headlines have several explanations for the early positive action with optimism about China trade being the obvious choice. There are also some comments about the delay in Brexit and less worry about economic growth as potential positives but China trade news seems to generate a reflexive response these days.
The S&P 500 had been up three days in a row before taking a rest on Thursday which looks like healthy technology action. Small caps have lagged a bit lately which is a bit of concern but there are no key technical levels in play right now for the Russell 2000 ETF (IWM) .
Overall this looks like a trading range market with hopes of a China trade deal providing support and concerns about slowing economic growth creating overhead resistance. There are plenty of bears growling about what can go wrong but market players are far more concerned about not being long for positive news on trade.
Many of the bears think that an effective China trade deal is nonsense. They use that view to scoff at the bulls that are keeping the market aloft but the danger of being caught on the wrong side of that news is very high. The fact that the algorithms react to the same positive trade headlines over and over are a taste of what could happen if something substantive is finally announced.
My current thesis right now is to approach this as a trading range market and that means focusing on the action in individual stocks. What sometimes occurs in flat markets is that traders gravitate toward a smaller group of active names which produces a 'self-fulfilling' prophecy. Traders are looking for action and help to produce it as they pile into a narrower group of stocks.
The important thing is to not be dogmatic about market direction. The price action is positive, technical conditions good and no obvious news headlines are causing issues. The market has forgotten the bearish narrative that was an issue last week and is not concerned that a trade deal likely will not occur until April.
I'll be ignoring the big picture gurus and focusing on finding some good stock picks. In a trading range market the best course of action is to trade.
Will I Have Enough Money to Retire?
Want to learn about retirement planning from some of the nation's top experts? Join TheStreet's Robert "Mr. Retirement" Powell live in New York on April 6 for our Retirement Strategies Symposium. For a limited time, tickets are available for $99 for this full-day event. Check out the agenda, learn about the speakers and sign up here.