If you have stayed heavily long as the market has gone through its recent gyrations, you are enjoying the recent action. The indices have recouped a substantial percentage of the losses off the December 24 low and have been going straight up since then.
What has been particularly exhilarating for the bulls is that the S&P 500 has closed higher than opened for eleven straight trading sessions now. All early weakness has been bought and the uptrend has shown no signs of slowing.
If you haven't stayed heavily long, the action is much more problematic. Stocks have gone from oversold to overbought and there is substantial overhead resistance coming into play. If you are looking for prudent entry points, they are increasingly difficult to find.
There is a good argument to be made for a pullback at this point, but there is one major issue that is makes it very difficult. That issue is the potential for good news on either China trade or the government shutdown.
Although the market is up strongly since the government shutdown started, there is still the potential it will see a positive reaction on news that it has been resolved. There is increased talk about how the shutdown is starting to have an economic impact, but the market has been unconcerned about it so far.
The main reason the market hasn't cared that much about the shutdown is that it is more focused on China trade. There are signs that progress is being made and there is the potential for some sort of positive announcement at any time. The likelihood is that the China trade won't be fully resolved for a very long time, but the market is still going to celebrate incremental progress.
There are a number of technology companies reporting earnings this week, which will have an impact on the mood of the market, but it is the China trade issue that is preventing a pullback at this point. Earnings have not been particularly positive so far, with the exception of Goldman Sachs (GS) , but the bears have made no progress with the indices.
Softness in the indices this morning is being blamed on some vague unease about global growth. China reported annual growth of 6.6%, which is its slowest since 1990. Ironically, this causes more hope that a trade deal will be struck, but it is causing some short-term pressure this morning.
If you are a stock picker trying to put some idle cash to work, like me, this market is in a very difficult position. There may be some day trades, like there were last week in marijuana stocks, but entry points for position trades are very difficult. I probably don't need to point out that it has been much harder for bears trying to catch some downside lately.
We shall see if the pattern of closing higher than we open continues. A shift in that dynamic will be notable, but with the potential of positive news on either a government shutdown or China trade possible, it is tough for the bears to be too aggressive.