Toughest Market Since 2011
I haven’t seen this type of choppy trading since the last quarter of 2011. We are stuck in a range between 2060 and 2130 for the last 2 months. It seems that everyday we are re-testing the highs and lows of the previous days range. This type of market is a swing/position traders biggest challenge. In fact it can be argued that even the day traders must be having a difficult time given how broken the patterns are intraday.
However, I still believe that the bulls are in charge short term. Therefore, soon we will see a new all-time high, as all selling has been light and is quickly re-bought at the same levels. Perhaps tomorrow we will see a 20 point rally on the S&P 500. It is overdue in my eyes. This range must be broken sooner rather than later and the path of least resistance is higher.
With that being said, I felt that today at the open, it was prudent to reduce my positions just in-case I am wrong. No system can survive without great risk management, and in this market I am just trying to stay above water till a trend shows up.
According to the traders almanac, the first trading day of June has been positive 20 out of the last 27 years, and today was no exception. Considering how hard the DAX went down on Friday, I expected a stronger recovery over in Europe. However, all the strength came in the Chinese market. The Shaghai market closed up a whopping 4.72%. That is crazy volatility. I am glad that I trade the US markets, I don’t have the stomach for those wild rides up and down…but then I don’t really have the stomach for the market in the US right now either. I suppose I just have to grin and bear it for a short while longer.
Market News:
U.S. stocks closed slightly higher on Monday, the first day of trade for June, as investors found some encouragement from mixed second-quarter economic reports.
The major indices pared gains to trade mildly higher after earlier fluctuating around the flatline. The Dow Jones industrial average traded about 30 points higher, after briefly topping a gain of 92 points in the open.
Morning data showed consumer spending was flat month-over-month, while construction spending hit a nearly 6-1/2-year high.
Utilities and industrials were among the leading sectors in the S&P 500. The Russell 2000, often considered a proxy on the domestic market, traded 0.3 percent higher as the dollar gained.
The Dow transports traded more than 1 percent higher, with airlines helping the index reverse a recent decline. The index is down about 8 percent for the year.
The Atlanta Fed’s GDP Now forecast remained unchanged from May 26 at 0.8 percent after the morning’s data. The forecast for real consumption growth fell to 2.1 percent from 2.6 percent.
Peter Cardillo, chief market economist at Rockwell Global Capital, highlighted improvements in housing and manufacturing data.
“Two important sectors of the economy continue to shine,” he said. “The economy seems to be headed for recovery in his quarter—modest growth.”
However, stocks held to a trading range. “We have a lot of data giving somewhat conflicting stories,” said Ben Garber, capital markets economist at Moody’s Analytics. He noted the counter effect of continued weakness in consumer spending.
There are “concerns that the economy is not bouncing back as much in the second quarter as people expected,” he said.
The Institute for Supply Management (ISM) said its index of national factory activity was 52.8 in May, up from April’s reading of 51.5, which had tied with March’s reading as the lowest since May 2013. The reading topped expectations of 52.0, according to a Reuters poll of economists.
Construction spending for April increased 2.2 percent, the highest level in nearly six-and-a-half years.
The May manufacturing PMI index came in at 54.0, slightly above the initial read of 53.8 and little changed from April’s 54.1 report.
Futures held gains after personal income increased 0.4 percent in April. Consumer spending was unchanged from the prior month.
Boston Fed President Eric Rosengren said Monday that he would like to begin raising rates as soon as possible, but risks from the slowdown in China and Europe in particular loom large even as growth at home is still not strong enough.
European stocks closed mixed on weaker-than-expected factory growth amid strength in health care stocks. The Shanghai Composite surged following a slight improvement in China’s PMI reports.
Investors continue to eye Greece, which faces a June 5 deadline for a payment to the International Monetary Fund.
European Central Bank President Mario Draghi and IMF chief Christine Lagarde will join the leaders of Germany, France, and the European Commission for talks on Monday evening in Berlin on Greece, European Union officials said.
Tuesday:
Monthly vehicle sales
10:00 am: Factory orders
Earnings: Medtronic, Dollar General, Cracker Barrel