It is often said that the stock market tends to act in a way that frustrates as many people as possible. The action Monday was a particularly good illustration of this saying.
After the market jumped around last week on various headlines related to trade, the stage appeared to be set for a reaction to the deal between the U.S. and China that was finally announced last Friday afternoon. Since the action was so random and volatile last week, it made sense that there would be further reverberations Monday. As I discussed in the morning, there was a near-perfect set up for a "sell the news" reaction, but that it was so perfect that it may not work.
Despite all the potential for movement, we ended up instead with the narrowest intraday range for the SPDR S&P 500 exchange-traded fund (SPY) since June 17. All that careful planning and strategy was for naught. Stocks did almost nothing.
What was most notable about the action, other than the flatness of the S&P 500, was that breadth was poor with about 2,800 gainers to 4,550 decliners. Flat markets can sometimes offer good trading under the surface, but that was not the case Monday.
The positive spin on this dull action is that it was productive as far as helping charts develop for a future move. Dull action tends to be the setup for drama in the future. We don't know when or how it will develop, but this pause in the action isn't bad news if you are looking to trade some stronger movement soon.
It would have been easy to write a headline blaming any movement on the China trade "deal." It is a bit harder to explain why the market decided to shrug instead. Market players were happy to move beyond the China trade issue for a while, but the resolution on Friday wasn't very satisfying. Hence we end up with a market that was relieved, but uncertain and confused.
Have a good evening. I'll see you Tuesday.