After breaking out to a new all-time high on Monday, the S&P 500 is looking for the catalyst that will determine if there is further momentum or a failed breakout.
Earnings season picks up steam as it digests a report from Alphabet (GOOGL) , looks ahead to Apple (AAPL) and sorts through dozens of other reports. To add to the complexity, the Federal Open Market Committee will announce its interest rate policy decision on Wednesday afternoon.
A quarter-point interest rate cut is well-anticipated, but the primary question is whether the stage is set for another cut before the end of the year. Odds of more cuts have been dropping and that is pushing down the 20+ Year Treasury Bond Fund (TLT) , but equities have been unconcerned so far.
The intense news flow hits the indices at an interesting technical juncture. The S&P 500 has climbed straight up the last two weeks after it was finally freed of the endless talk and speculation about a China trade deal. That issue will move into the forefront again soon but much of the recent strength was a product of shifting from that problem to a focus on individual stock picking.
The market action has undergone a major change in character in the last couple of weeks as it has shrugged off the macro issues with a focus on overall market direction and individual stock picking and earnings. There has been some sector rotation action that has contributed to the focus on stock picking, but what has been most important recently is less worry about the economy, Brexit, China, politics, central banks and other macro issues. The bears that have tried to formulate a negative narrative based on big picture issues have had great difficulty fighting the trend.
The challenge at this point is managing positions while overall technical conditions are positive but many stocks are extended and ripe for some profit-taking into major news events. The action right now is all about positioning and protecting recent gains.
With the move that the market has made, stock picking is becoming harder -- especially since many of the smaller-cap names will have earnings reports very soon.
My game plan is to stay focused on managing positions and not worry too much about overall market direction. My goal always is to keep my accounts as close to highs as possible and after the recent run, that will be of utmost importance as we enter a period with significant news flow.
We have a little early softness as Alphabet sells off slightly, but it is holding up very well given its EPS miss.