After a fast and furious run the indices have been resting for three days now. So far it looks like a healthy consolidation rather than a market that is set to roll over. One of the weak spots lately has been oil, as reflected in United States Oil Fund (USO) , which has seen one-day drops of 8%, 9% and 4% during the last two weeks.
Here on Thursday morning oil is indicated higher following attacks on two oil tankers in the Gulf of Oman. While attacks are seldom a market positive they are causing indices to rise sharply here on Thursday morning due to the spike in oil and a shift in focus away from the China trade issue.
In addition good earnings news from Lululemon Athletica Inc. (LULU) and RH (RH) , formerly Restoration Hardware, is helping the mood. The retail sector trended down for much of the month of May but has recovered well in the last few days, in large part due to strength in Walmart Inc. (WMT) . This strength undermines the narrative of a slowing economy to some degree, but it isn't enough to have any impact on the hopes for a Federal Reserve interest rate cut.
Despite the slow market action of the last few days there has been some decent stock picking for active traders. There is no sign of a rush for the exits as the indices stalled, which suggests that this is just healthy consolidation while market players look for the next catalyst.
There is often a desire to form a strong market bias in an environment like this and then to look for data and information to confirm that bias. Bears search for negatives in the economic news and bulls look for reasons for optimism from a dovish Fed. The best approach is to appreciate both sides of the argument and wait for further developments.
It can be quite enlightening to embrace the idea that you really don't know what will happen next and to approach the market from that standpoint. If you find good charts, then buy them; if stocks act poorly, then sell them.
There are plenty of folks happy to dissect all the issues that are going on in the world and tell us how they think they will impact the markets. Most of the time they are guessing, although they will sound very intelligent as they discuss all these important issues.
The thing I know is that the market action isn't bad right now and there are some stocks that look OK. I really don't need to think too hard beyond that.
I'll be looking for stocks to buy as the action develops and will be cutting those that act poorly. It doesn't sound as intellectual as some of the big-picture pundits, but it works.
