It was a generally positive day for the market, with the indexes mixed, but over 500 stocks hitting new 12-month highs. Breadth was slightly negative, but the indexes bounced off the intraday lows and closed with a little buying flourish.
What was most remarkable about the action Monday was that, according to Bespoke Investment Group, the SPDR S&P 500 exchange-traded fund trust (SPY) traded in its narrowest range since last September and the Nasdaq PowerShares exchange-traded fund trust (QQQ) had its narrowest range since way back in December 2017. If we exclude the first five minutes of trading at the open, the ranges are even more narrow.
It makes for some dull trading, but what does it mean? Is this just low-volume consolidation that sets the stage for another thrust higher or is this stalling action that suggests that a rollover is going to occur?
The answer will depend on how earnings season develops. The first major report of the season from Citigroup (C) was better than expected, but sold off before bouncing back to flat at the close. It suggests that expectations may not be as low as some of the bulls might hope.
Tomorrow we have a few more earnings reports to digest, but the best course of action is stay flexible and open-minded and see how things develop from here. It is easy to formulate big-picture arguments for either side, but it is the price action that will determine what happens.
The bulls still have the advantage here, but they can lose it fairly fast if they don't generate some energy soon. We may have to wait another week to see if earnings will provide some juice.
Have a good evening. I'll see you later.
Citigroup is a holding in Jim Cramer's Action Alerts PLUS member club.