A Time for Patience

It was a mixed day for the indexes on Friday, with breadth running more than two to one negative, but President Trump indicated some flexibility on tariffs, which provided a little intraday support. Volume was higher, and there was added volatility due to option expiration of an estimated $4.5 trillion in contracts tied to stocks, ETFs, and indexes.

Small-caps IWM led to the downside with a drop of 0.6%, while the Magnificent Seven pushed higher with a gain of 1.4% due in large part to a 5.3% jump in Tesla TSLA.

The good news is that the indexes are holding above recent lows, but the bad news is that they are unable to gain any positive traction. We are stuck in a low-level trading range while investors try to sort out the high level of economic uncertainty.

Mike Wilson of Morgan Stanley believes there will eventually be a rolling recovery, and there won’t be any new highs into the second half of the year. There are signs of rotational action under the surface but it is very inconsistent and has not gained any clear momentum.

Again, I want to emphasize that this is a time for patience as better technical conditions develop. Don’t worry about trying to catch the exact low of this down cycle. When things do turn, there will be plenty of time to ride an uptrend that lasts weeks or months. Trade short-term volatility, but don’t trust the movement to last very long.

Have a great weekend. I’ll see you on Monday.

At the time of publication, Rev Shark was long TSLA.