New closing highs would normally be applauded but as time goes by, we have to deal with a resilient market trading in a range bound pattern.
On Friday, the S&P closed at a new closing high and would normally be applauded and many are, but as time goes by my thoughts and opinions are becoming redundant and that is that “we” have to deal with a resilient market trading in a range bound pattern…on light volume.
Strong follow through on a new closing high for the S&P is important to see if the new highs are validated as other major benchmark indices (Nasdaq/Russell (IWM)/Transports) lag. Call me old school but I follow the Transportation Average A LOT.
Even though the currency and bond markets have had wild swings- this is a market of contrasts and indecisions with no direction and many factors have been hanging over the markets. The Asian market’s volatility is cause for concern (Shanghai), the European Elections took the FTSE up over 2%, news about a Greek default still ‘leaking out’, the US jobs #’s still being digested, crude oil having a 25 % gain in April alone, earnings season is still in swing with such bellwethers as Home Depot and Walmart still to report, and the real fear is the sooner than later threat of a rise in interest rates.
Still, no one is flinching and there seems to be a proverbial “line in the sand” with the bulls winning. But they are winning with the indexes and ETFs…although the indexes mentioned above for the past week have been in a narrow range of about 2%. One thing I would like to remind the readers and I don’t mean to pontificate, but in this market an old cliché comes to mind and I have fallen to it recently…”never short a dull market.” I talk to many of my peers and those I respect throughout the day and this is a time when less is better. Most are trading the opens and the close and putting on smaller, “pure-play” positions for any overnight follow through. Trying to be a hero is costly and not good for the ego and the bottom line.
As traders, with the narrow range and anemic volume, the range in the major indexes is a cause for concern and we are obviously still in an uptrend and I hope few can argue with that, but we trade and there have been some great movers in individual names with good price action, volume and range. As opposed to the major indexes, many stocks we have been playing have had 5-10% ranges and have news that we can gauge a futures move against…increasing our edge and not trying to time the market or pick a direction. Granted, many trades may seem to be crowded trades but that’s why we add to winners and sell the losers as a bad position in a narrow market more times than will keep going against you and with low volatility, a loser usually is a loser.
In the upcoming week we have to deal with some housing data, a handful of retail earnings as mentioned above (add TGT to that) and some Fed talk later in the week, but I would go out on a limb and say that there will be other geo-political news/company specific news that will be a market moving catalyst, so in the meantime be prudent, have a plan and stay disciplined.
Our traders at Tradeview Markets have been playing the following:
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