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Assessment: Slight bounce in the futures is being attributed to a possible debt ceiling deal. The issue for the market remains…as has been the case since March, will we break out of this zone in SPY from $407 to $415?? Until we do, it’s all about scalping and day trading because momentum…real swing momentum has been missing for a few months now.
Under the hood, this market is being kept propped up by large cap tech…like Apple. It is these large cap techs that are hiding the real selling going on under the hood.
The problem for both bulls and bears is the lack of major catalysts. I mean, we have inflation data, which last week would have usually launched the market higher…and it did nothing. The narrative has moved to the labor market and it possibly signaling a recession coming. Nobody cares about inflation any more. There’s a new flavor of the month. Earnings reports have been mixed, but most companies are revising downward, however that hasn’t awoken the bears nor concerned the bulls.
Combine all that with the fact we are now in the notoriously quiet market period from May to September and we have to be careful not to force trades just because we want trading action. In sideways markets, as I will continue to repeat, BOTH bulls AND bears lose money. Risk reward gets out of whack because the returns are not large enough (no market movement) to offset the risk of investing. So, many traders just stay out of it. The fact that the “risk-free” 3 month Treasury Bill yield is over 5% makes it very easy for traders to stay out of the stock market and park their money in T-Bills. Until that dynamic changes, we will likely continue to go sideways.
Good luck in your trades!