So far Tuesday the market has had two dips, both of which quickly attracted dip buyers. After the market traded back to flat, following the gap up open, sell stops were triggered when the lows of the day were breached. That triggered some sharp algorithmic selling, but the buyers showed up and completely recouped the loss within about 30 minutes.
The second dip was triggered when President Donald Trump said that if a trade deal was not made with China, he would just raise tariffs even higher. This news has become so routine that the dips are shallower and don't last long.
What traders are looking for at this point is a shift in patterns. If the dip buyers evaporate and there are some lower-lows intraday, it will be a major shift in the action.
It is important to recognize that in the age of algorithms, the market action is all about patterns. The programs are triggered to trigger when certain conditions exist and they keep doing the same thing over and over. For example, buying the dip on negative China headlines. It has worked so consistently for so long that it is automatic and actually become self-fulfilling to some degree.
Like many other traders are rooting for some weakness, because it would shake up sentiment and lead to some new opportunities. The market has been churning at the highs for a while, and it just doesn't make for a very good trading environment. Some selling pressure that causes a little fear and worry will be ideal for some increased volatility and better entry points.
The close Tuesday will be particularly interesting. If the market dips again and the lows are tested, then it will be a significant change in recent patterns. Whether that leads to some downside momentum will be the issue, but it will change the pattern of the action and will pave the way for some new trading strategies.
Overall there is still plenty of positive action in individual stocks on my screens and there isn't any rush for the indexes. I don't expect downside to be easy or to last for long at this point.