If the trading seems a bit tentative and confusing, you're on the right track. And don't blame it on traders on vacation; there's plenty of that, but there's a reason for the market's uncertainty.
Traders are in a "Don't fall in love with anything" phase right now -- is the financial rally over? Is the decline in materials over for the moment? Has big energy finally bottomed? There aren't strong convictions on these major issues.
That's why you get a day like today:
-- Materials are clearly oversold and are up today, but most traders are only playing them for a 1-2 day bounce, so Potash , Mosaic , Freeport McMoRan, Alcoa are all up in a notable downtrend.
-- Exxon, Chevron, BP , and all the other big energy names have stopped dropping, but neither their trading volumes nor their news flow suggest a strong reason to buy;
-- Financials continue to have negative headlines, and have been mostly sideways for the last 2 weeks.
Does this sound cynical? One trader this morning -- a momentum trader -- noted to me that the stock market has become a rental market, meaning it's not clear how long you can own anything.
In this environment, is it any wonder that the talk is more technical in nature, more about Stochastics and Relative Strength than about Price-to-Book? When you can get 20-25 percent moves in a stock in a single week, how can you not become a short-term trader?
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