The concerns overnight relative to the China/US bickering over the Red Sea evaporated into the open this morning and back to the tug-o-war between buyers and sellers. Neither side seems to have the upper hand nor do they seem to have a catalyst near by that could drive one into a leadership role. Energy was the clear winner as sectors go on the day and crude oil moved up 3% to assist the move. In both instances it just keeps the trading ranges in place, but does nothing to change the longer term view. There are plenty of moving parts and hurdles to jump, but investors seem to be content to look for the catalyst that will drive the direction near term. Thus we remain patient.
This morning I made a list of ten ideas to watch today (in note link below) and they panned out pretty well on the day… the question is sustainability or trade. As I stated in last nights notes this has become a trading market and thus that was my approach on these ideas. Treasury bonds (TLT) as an example were up 1.5% and could move up another 1-2% now. The leveraged trade with TMF was up 4.6% and if it follows through will gain another 4-6% for a nice trade. Take a look at the others on the note sheet. If you don’t start your day with a trade sheet you put pressure on yourself for defined entries and exits as the market is moving. Plan your day and you will find a greater accuracy in your trading.
Russell 200o Small Cap index closed with a doji candle on Wednesday… it repeated that task today with an inside day. This sets the index up for something. Buying and a move back to the $126.50 high? Selling and a test of support? Indecision is a decision, at least that is what one of my baseball coaches always told me. The decision on growth sectors is still no being made short term and the best course of action to wait and see. IWM or TNA are the ETFs to trade the sector.
When the day was all said and done the stall at or near the highs for Semiconductors, small caps, software, biotech, internet and technology explain clearly the challenges facing the broader indexes. We just continue to take this one day at a time and let it all unfold. Up trendlines are still in play and we have to stick with that bias until they break. Friday leads us into a long weekend with Memorial Day and the markets being closed. Volume is likely to be on the light side and we will have to be cautious about any speculation that may arise. Evaluate and execute your plan accordingly.