Market Shrugs Off Another U.S., Iran Setback, Leaving Bears in Disbelief
There is strong speculative action outside of the indices and that is where the money is being made.
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The market did a fine job of shrugging off worries about the Iran-U.S. negotiations. The "war is over" rally on Friday encountered several obstacles, and there is now a likelihood that no deal will be reached in time to prevent the end of the ceasefire agreement on Wednesday.
President Trump continues to issue statements that he holds all the cards, while Iran states that it will never give in to pressure.
A Shrug at the Close
The market's response to this news flow was a shrug. The S&P 500 finished the day with a loss of about 0.2%, while the Magnificent Seven (MAGS) lost about 1%. The most impressive action was in the Russell 2000 (IWM) which gained 0.6% and helped to deliver positive breadth of about 53%.
Pundits Are Missing the Individual Stock Story
The news media and many pundits are focused on the extended indices, missing some great action in individual stocks. There is near-universal puzzlement over why the indices can stay so strong in the face of the Iran mess.
Oil prices were higher, but interest rates barely budged and there doesn't seem to be any major economic worries taking hold. The critics are befuddled by a market that is ignoring their brilliant logic and insight.
Price Action Beats Fundamentals
The big mistake that the bears are making is assuming that their fundamental arguments are more important than price action. Investors have been caught by surprise and are not positioned correctly. Their FOMO is so strong that they don't even wait for pullbacks before they buy. They have been anticipating a positive resolution to Iran for weeks now, and they are still trying to stay ahead of that news.
If you look at the technical action in individual stocks, the market feels different. I see a long list of smaller stocks that jumped more than 10% on Monday. Some are extended, but some are building good charts. There is strong speculative action outside of the indices and that is where the money is being made.
Manage Your Stocks, Not the Market
My best advice is to watch your charts. The talk about the extended indices is becoming tiresome and repetitive. Stay focused on managing your individual positions. Take partial profits if things become too extended and cut the laggards. If you manage your stocks, then the market timing will take care of itself. Shorting the indices is too much work for too little gain.
Have a good evening. I'll see you tomorrow.
Related: How Much Upside Can Remain for a Market That's Afraid to Sell?
At the time of publication, DePorre had no positions in any securities mentioned.
