After a powerful two-day rally into key resistance levels, the indices were due for a pullback but the sellers couldn't close the deal. Following a sharp morning drop, stocks rallied back sharply before sell programs in the last few minutes went to work. The indices ended with mild losses for the day on poor breadth of 2,300 gainers to 5,000 decliners as small-caps lagged.
For the week the indices only suffered small losses but the technical picture is a difficult one. The S&P 500 is still under its 50-day simple moving average and the big bounce after some panic selling on Monday does not look that convincing.
In addition to the worrisome technical picture, the negative narrative is gaining traction. Trade wars, currencies and bonds all sent negative messages. Worst of all, the dovish Fed no longer produces the succor that it has for so long. Market players were dazed and confused as bond yields plunged to the lowest levels in years.
The fact that it is mid-August and peak vacation time on Wall Street makes it even more difficult to navigate the increased volatility. Trading was very thin Friday and that helped to produce some random movement in both indices and individual stocks.
The good news is that this is the sort of trading action that produces opportunities but it requires some real effort to find an edge.
Have a great weekend. I'll see you on Monday.