We are all trying to wrap our heads around this base. Arguments can be made on both sides. The bulls will tell us that sentiment is unwinding nicely as we hold the range, while the bears will say the longer this goes on without breaking out tells us the bulls have run out of steam. Actually, both are right to some degree but the truth is that we really don't understand fully why the market won't make a definitive move one way or the other. S&P 500 2134 and 2040 are rock solid in terms of resistance and support. There are other factors. Ms. Yellen is clearly dovish and wants this market higher. She's playing up how rates won't be aggressively raised, if at all this year. When she spoke Wednesday at their last meeting she said they are still data dependent, and they made no firm statement about raising rates in September, which is when everyone believes she will do the dirty deed. She seemed to almost go out of her way to let us all know that she may not raise it at that time.
The market loved this, of course. This is intentional behavior on her part to support those 401K's that folks rely upon when making decisions about spending. The bears will further argue their case by saying those monthly charts just can't go any further on their bloated oscillators. That if you look at that type of set up historically, it has never ended well for the bulls and they'd be right to make such a statement. Those index monthly charts are quite bearish in nature but then the bulls will say it seemed that way when looking at the weekly charts but they have unwound without any price erosion worth talking about.
The arguing goes back and forth but truthfully the onus is on the bears to remove the overall bigger-picture up trend in place. Only a strong move below 2040 will get that done for them, and, thus far, they've shown glimpses, but nothing else worth mentioning. So here we are with the market stuck. Both sides having their moments but neither side able to claim victory. No way to know how much longer this painful base goes on but we must respect the message. Lateral is that message in the nearly five percent base. A day at a time.
It's important to go over this again. Three very poor behaving sectors that prevented the S&P 500 from breaking out were the industrials, transports and Semiconductors. All three appear to have made bear-market bottoms, and make no mistake about it, they were nasty bears there for a while. If heavily weighted sectors such as these start to put in important longer-term bottoms one would think the market should break out, but we can't be sure the bottoms are truly in until we get some inside day selling on light volume, or any form of a lateral move on light volume that holds the gap ups. The bears need to get busy bringing these sector stocks back lower and fast. Each day they're looking better and better. While they improve the financial stocks are unwinding slowly without much price erosion. If they bottom soon without falling much from here that would only add to the bullish scenario. Interesting times when focusing on these key groups. More favorable than not for now.
Look folks, I know there are no guarantees with anything in this game. I would love to get very aggressive but the environment is dangerous with tremendous whipsaw. What look’s good one day isn't the next, and that can be flipped around to the other side. No consistent action except for inconsistent action. I know you all want more and more but this is just not the best for something like that. If things set up I'll try more plays here and there. I would love to have ten plays out there but if we get the wrong reversal you'll all get hurt and I don't want that. S&P 500 2040 seems tough to break but trust me, it can happen in the blink of an eye if something hits out of the blue or it can take just those bloated monthly index charts to do the trick.
Things are more hopeful for the bulls but hope doesn't make a market. The advantage is with the bulls no doubt but I do not think anything is even close to a guarantee. As things set up i will adjust. You should as well. You should also recognize this part of the bull market is far tougher than what we've had to deal with years prior. Be smart and choose stocks with the best earnings reports. I'd avoid, but do what you want of course, chasing the bear market sectors hoping for the big bounce. The market is extremely difficult here. Taking nothing for granted. A day at a time.