When indices are at their all-time highs, it usually stirs up some stronger emotions. Many market participants are worried about missing out or about keeping pace with benchmark indices. The pessimists are busy trying to call a market top.
This market isn't generating much interest at all. The trading ranges of the major indices are very narrow. Volume is light and small-caps are chronically underperforming. It is action that is more typical of a market low than one where the indices keep pushing to new record highs.
This sort of technical action is an Ink Blot or Rorshach test of investors -- they tend to see what they are already predisposed to see. The bulls will tell us that this is healthy consolidation that will set up another leg higher as earnings come in better than expected and central banks continue to make dovish moves.
The bears will tell us that this dull action is an indication of indecision and is a prelude to rollover that will be triggered by slowing EPS growth and central banks that are running out of tools to use to manage the economy.
The technical patterns tend to favor the bulls at this point. When markets are slow and dull, investors are fond of saying "don't short a dull market" as there is an inclination for bored traders to put cash to work when they are trying to find some action.
The results of the earnings season will be the likely justification for whatever the market does next. Tuesday morning Johnson & Johnson (JNJ) , JPMorgan (JPM) , Goldman Sachs (GS) and Wells Fargo (WFC) are reporting. On Monday, Citigroup (C) saw some uncertainty about its better-than-expected numbers and ended up the day close to unchanged.
The meat of earnings season doesn't really start until next week, but there should be some hints of the prevailing mood as the numbers are digested today.
The market will also be looking forward to the European Central Bank and the Federal Reserve interest rate decisions before the end of the month. With earnings and central banks, there will be no shortage of catalysts, so the likelihood is that volatility and the intensity of the action will pick up soon.
It's a peculiarly quiet and sedate market right now, but it is not indicative of anything in particular. Those with a market bias will formulate their arguments about what it means, but the better approach is to respect the trend and wait for a change in price action before making major moves.
The sedate trading continues Tuesday morning with early indications close to flat.
