We have a slow start to the week as market participants continue to struggle with a long list of negatives. The economic debate has been shifting to growing worries about recession, but inflation concerns remain elevated. There has been softening in energy prices and there is hope that inflation may be close to a peak, but that is driven by concerns about economic slowing.
The June jobs report is out on Friday and that will intensify the debate over recession, inflation and stagflation.
Second-quarter earnings will start to roll over the next few weeks, and there have been growing concerns that estimates may still be too high. There has not been the level of estimated cuts that would seem likely in view of the economic challenges, so watch for some preannouncements this week to occur.
We are stuck in an ugly bear market as we head into the dog days of summer. There is hope for counter-trend bounces and there has been some relative strength in the hardest-hit sectors such as biotechnology, but technical conditions are extremely poor and it is going to take charts a while to develop before they can be trusted.
I'd like to be more upbeat about the market right now, but this is clearly an environment for very short-term trading. Traders are focused on catching oversold bounces, but there isn't much trust in the ability of stocks to deliver sustained upside at this point.
Earnings season is going to determine where the trend is headed in the months ahead, and right now, there is growing concern that there will be some very poor news.
My game plan is to stick with shorter-term trading and not be in any rush to build longer-term positions. There just isn't any good reason to be heavily long right now.