I constantly preach to stay focused on price action rather than headlines. That is often harder than it sounds since the term 'price action' is not very precise. There are many different sectors and themes as well and they don't often all move in tandem.
Today is one of those days that the price action is a concern. There isn't a major drop in the indices or extremely poor breadth but the stocks that I follow most closely aren't seeing much interest. That may just be a temporary condition but there are signs that it may persist.
Many market players are hopeful that there will a fiscal stimulus deal to give the market a quick boost but the nature of the price action increases the chances that there will be selling into the next bout of strength. It is easy to imagine a scenario where a fiscal stimulus deal is celebrated for a day or so but the strength is sold as concerns about the election begin to build.
There are no signs that a major market reversal is about to begin but the weaker price action is a shorter-term concern and it is making me a little more defensive. The real test will come if we do see a fiscal stimulus deal. A deal is well anticipated but there is much skepticism about the timing. Everyone expects a very positive market reaction if it occurs but how much will the market be able to run?
I don't want to sound too bearish because I see plenty of individual stocks that I like, but I do want to be more cautious as the price action just isn't very good right now.