After two days of bouncing back from weak opens, it was a day of rest for the indexes. The major indexes chopped around with negative bias on breadth of 3,200 gainers to 4,200 decliners. Over 300 stocks were hitting new 12-month highs, but there were quite a few intraday reversals as profit-taking picked up in a number of areas.
What was interesting Tuesday was that buying energy shifted since there wasn't any sharp drop at the open to entice dip buyers. Instead the indexes drifted around with the buyers making a couple pushes during the day, but not generating any real upside momentum.
The good news is that under the surface there was some increased focus on stock picking. Many market players are hesitant to chase extended indexes or stocks, but they are willing to pursue attractive setups. Stocks are not moving in tandem with the indexes, so that does make for better trading of individual issues.
Many market participants are anticipating some sort of retaliation by Iran as a possible trade catalyst. Since the dip buying worked so well the last couple days, the inclination will be to buy a spike down should some negative Iran headline hit.
It is important to note that there is no big fear right now that the market is going to collapse on some sort of negative news headline. Traders are focused on strategy and the strategy that has been working is to buy negative reactions quickly.
It is a good time to focus on the trees rather than the forest right now. Too many market players are foregoing opportunities by trying to call a top in the indexes. They have been at it for months and they are missing out on the many opportunities that are created every day. If the main thing on your mind is whether the market can continue to trend higher, then the likelihood is that you are costing yourself money.
Have a good evening. I'll see you tomorrow.
