The jobs report is in, and the market's initial reaction was not a thumbs up, or a thumbs down... it was more of a sideways thumb. S&P500 futures moved a point in either direction before heading back to the same place it was before the report. Clearly 2017 is the most efficient stock market the world has ever seen. We are witnessing market stability in its finest hour.
As S&P500 futures gyrate around in a 1 point range this morning, after slowly grinding higher in the overnight session, the old "don't short a dull market" mantra continues to ring true. If this keeps up it might be time for a market EKG.
Is this market truly the most efficient, all knowing market of our time? That is what the price action implies. A lack of price movement implies the right price is being paid for stocks. Supply and demand has reached an equilibrium. Right? Rewind the clocks 8+ years and it was the exact opposite. Prices were in flux. Trading ranges were wide. Market uncertainty was high. Demand and Supply were unknown.
Today the calm is palpable in the market. Corporations are buying back their own stock at prices 100's of % or even 1,000's of % higher than their trading price 8 years ago. Many are doing it via cheap debt. With rates this low, borrow and buyback is working GREAT. As long as cheap debt remains the norm, higher stocks prices and market calm will remain the norm. Money for nothing and your stock buybacks for free. I want my... I want my... I want my record high S&P.... I want my... I want my... I want my record high S&P....
Despite the steady onslaught of record highs there is weakness. The market has trouble getting out of bed in the morning.
The pattern of morning weakness remains. Recently most larger cap names have been consolidating, while small caps have reigned in some of the gains from record highs. $IWM has actually been trading lower over the last week. It's been a quiet pull back, masked by the Dow, Tech and the S&P500.
For small caps the channel remains strong and this long consolidation phase is likely to end with prices breaking even higher. The one caveat is that small caps have been a decent indication of what lies ahead. Small caps were first to rally just before the election. It's worth keeping an eye on $SPY $QQQ for weakness lasting longer than 2 hours.
Yeah it's like a Viagara disclaimer. If Morning Downside persists for more than 3 hours, please consult the PUT portion of your option chain. Anything lasting less than 3 hours will end with bigger smiles on the faces of those long the market.
The path of least resistance remains to the upside. Despite equity prices at record highs, Central Banks remain supportive and with inflation still low, at the ready to provide even more ammunition for continued record highs.