A Good Market for Short-Term Trading, Not So Good for the Longer Term
Recent volatility is preventing buyers from being overly aggressive.
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The market bounced back on Monday after an ugly session Friday as worries about tariffs faded. It wasn’t a very energetic session, but breadth was 6,200 gainers to 3,400 decliners, and the Nasdaq 100 QQQ led with the help of semiconductor names.
The Magnificent Seven MAGS acted better, but most of them suffered technical damage recently and needed some work before they could be trusted again. The Russell 2000 IWM and the DJIA both moved up about 0.4% but lagged behind the S&P 500.
While it was an OK session, the recent volatility prevented buyers from being overly aggressive. In addition, there is a CPI report on Wednesday that could shake things up, as well as the potential for President Trump to surprise the market with something unexpected. Tariff worries have abated, but that could easily become an issue again.
Although the Mag 7 names are no longer leading, this continues to be a bull market with elevated volatility. There is some concern that the market is becoming too toppy, and that is helping to create some "climb a wall of worry" action. We need some skepticism to keep the bulls from becoming too confident.
This has been a good market for very short-term trading, but it has been much more difficult for position trades with longer durations. There is too much variation day-to-day, which makes it hard to hold unless you are using very wide stops.
It is likely that this elevated volatility will continue for a while. The good news, however, is that there is support, and stock pickers are active. Small-cap earnings season is starting to heat up as well.
Have a good evening. I’ll see you Tuesday.
At the time of publication, Rev Shark had no positions in any securities mentioned.
