The market popped on Wednesday and held on for dear life once again, although there wasn’t a 500-point reversal on the Dow, and all the major indices finished higher. However, I observed many weeks ago that sharks die when they stop moving. In fact, sharks never even go to sleep. Once they stop moving, it’s instant death, and that’s what’s happening to upside moves in this market.

And the swiftness in which markets turn from rally mode to ‘every man and every woman for themselves’ mode is remarkable.

It’s true the algorithms and trading programs are exacerbating directional shifts, but more and more, it looks as if traders are trying to game those waves as well.  If you can handle the risks, it’s a good way to make money. The good news from yesterday is the market didn’t turn negative. Perhaps if the closing bell rang at 5 PM rather than 4 PM, we could have seen more selling.

That said, late session angst circulated around the Theresa May confidence vote. The longer it dragged on, the more selling mounted. The news indicated that enough members of the conservative party voted confidence for the British Prime Minister - it was announced as the closing bell rang. Interestingly, the aftermarket move was muted. 

If that news had hit before the close, I think major indices would have finished the session at the highs of the day. Now, May heads back to the European Union (EU) with hat in hand, looking for crumbs from the elites that never know when they’re in a weaker bargaining position. The edges of the EU are frayed, and the grand experiment seems doomed. Maybe Merkel and her friends in Brussels will consider that when looking down at May.

Nuance, Signs, & Signals

I’m always looking for interesting action and movement that doesn’t hit the radar and won’t be on the front page of the Wall Street Journal. Nonetheless, they are compelling enough to watch for actionable decisions. 

The one I share is market breadth, which hasn’t been that great, even during the up days. One component is the milestones of new 52-week highs and lows. The past week hasn’t seen a demonstrable change in new highs, but new lows have improved dramatically.

This suggests maybe bottoms. Even short-term bottoms have been put in; or at the very least, while momentum names have taken the lead, there is some bottom fishing. I’m not sure if it’s too early for value-seeking investors, but there are a lot of names to choose from, and some investors apparently have already begun to nibble.

Chart-watchers watch for attempts to take out recent session highs, which happened in the S&P 500 for a moment yesterday (see arrow). I’d like to see it happen on a closing basis.  Also, we need big volume on upside spikes.

Wild actions, runaway emotions, and determined machines keep churning, but watch for the smaller moves that speak to fundamentals and signals that could make you money.

Today's session

Initial jobless claims declined by 27,000 to 206,000 (consensus 225,000). This was the largest weekly decline claims since April 2015. This should quell any fears of a slowdown in the labor market. The four week moving average declined by 3,750 to 224,750. Continuing claims increased by 25,000 to 1.661 million. 

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