The indices are looking to open higher Tuesday morning following comments by Treasury Secretary Steve Mnuchin that trade talks with China will resume in two weeks and that lower-level negotiations are making some progress.
Market participants have heard this many times before but it still generates an automatic buy response as traders and algorithms try to capture some very quick gains. Unfortunately, no one is confident at this point that something meaningful will be announced this week, however, the risk of being caught being overly pessimistic is keeping a bid under the market.
There is often an inclination to try to read too much into the sort of action that we are seeing right now. At some point it may be a prelude to something dramatic but trying to guess what and when is not a good approach to trading. We simply have to stay patient and see what develops.
Some pundits believe that the only way to approach the market is with dramatic predictions of what is going to happen. While that provides some interesting entertainment in the near term, it is of little value in the longer run. When the market starts to react more forcefully there will be plenty of time to make some moves and capture the movement.
In the near term, the market is primarily a hostage to vague and meaningless headlines about China trade. The computer algorithms will use them to try to catch overly anticipatory traders leaning the wrong way, although most market players have given up on trying to predict an immediate move of some magnitude.
Like many others I'm anxious to be more aggressive with some trades. The opportunities are limited, however. There were a few breakouts Monday but more than a few failed breakouts as well. There aren't any major themes producing momentum. Precious metals, which perked up Monday, are reversing back down Tuesday morning.
There are some stocks that I believe will see positive momentum into third-quarter earnings but that is still too far off for any immediate action.
It is important to realize that you don't always have to have a strong view of what the market is going to do next. Sometimes it is a good idea to just sit and wait for evidence and technical conditions to develop. That is what I am doing now.
We have a positive start Tuesday morning but the challenge is follow-through. Until we see some higher highs, it is just another trading range market.