Stock Market Waiting for a Game Changer

spy 19 cFor what seems like forever, actually it’s only been a few months, equity markets have been stuck in a range bounded by the spring highs and gradually ascending 200 day moving averages and critical trend lines.

Definitely a tape to stick to your trading rules. The market isn’t going to bail you out of a mediocre trade.

Bullish traders have failed to break the market out to new highs and the bears struggle to gain momentum on the downside. It almost feels they’ve both stopped trying.

The old trading adage is that the longer you’re in a tight trading range, the more decisive the ultimate break will be.  Typically the catalyst is an event not on the radar screen.

That could have been the Chinese Yuan devaluation, but again the market’s resilience brushed that away with ease.  The waiting game continues.

Tuesday Stock Market Recap: Equity markets were not able to follow through on Monday’s reversal rally as modest gains from the morning faded throughout the day.  At the 4:00 close Major Market Averages gave back roughly half of Monday’s gains and remain well within the tight range established by the last two weeks of trading.

DJIA, -0.2% at 17,511 broke a quiet 4 day winning streak and still has considerable resistance between 17,625 and 17,775.

The S&P 500, -0.25% at 2096 continues to form a very tight converging triangle as it struggles with the 2100 level.   the S&P 500 hasn’t closed above 2110 for 4 weeks.   Watch that closing level of 2100 closely.

spy map 19

The NASDAQ, -0.6% at 5059 like the S&P 500 is in a tight triangle of higher lows and lower highs, bounded by the July 8 low and July 20 high.  While the NASDAQ has a more positive uptrend than the S&P 500 and other indices, the big risk here is negative internals, and a narrowing set of names providing the leadership for potential new highs.  

The Biotech; IBB, and Social Media; SOCL,  names have slowed down a bit from their sharp gains of the last 12 months, and the generals have been inconsistent with GOOG and MSFT leading, while AAPL and INTC have notable laggards.  One of the biggest risks to the market is NASDAQ breaking its multiyear uptrend.

It hasn’t happened yet.

The Early Line:  Stock Index Futures are looking at moderate losses to start the day.  Immediate support has to me the lows from the first hour on Monday.  Chinese stocks finished with gains of slightly better than 1%  after having losses of 5% midday.  Yes, the government did step in to support the market.

We get CPI numbers at 8:30 AM and on course minutes from the August FOMC meeting at 2:00 PM.

tanderson@mndpartners.com tjanderson56@gmail.com

Twitter: @TJAnderson1

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