The stock market was down early and had a relief rally but in the wake of the Trump-Putin news conference Monday I thought traders should not expect much more, writes Gene Inger Monday night.

We should focus on the main influence on this market, which was the Oil drop, and also the IMF warning of a big risk in financial assets, which to a degree dovetails my own concerns, but emphasizes it in a global fashion.

Reuters: Wall Street gains Tuesday on Powell comments, rosy earnings expectations.

Sentiments continue trying to rationalize chasing stocks while they harp on the yield curve issues. In reality trade deals (or lack of them) likely determine what will be on tap near-term. And that’s very important considering that we’re likely at peak earnings so the market is more vulnerable to disappointments vs. responding favorably to already-anticipated solid reports.  

This extended market is also migrating into a seasonally weak time with a cooling-off period essentially postponed partially as a result of all the warnings from some pundits. This ironically increases positions on the short-side, but again all that does is create bounces (short squeeze moves) which are unsustainable. Hence the rinse & repeat cycles.  

Bottom line: These series of oscillating moves frustrate traders for sure. At the same, time day-traders have been able to scalp relatively tiny moves.

It is just the type of frustration that convinces everyone that algo-driven S&P 500 (SPX) computer moves have taken over permanently. Actually, they did, but less so more recently.

It’s become more a market of stocks, and that’s evident.

chart 1  

It also should be noted that as the support provided by Oil stocks fades for at least a bit, the illusion of a monolithic market capable of advance fades.

I continue to suspect especially in August and September that volatility is a serious risk. It’s not disaster, but meaningful corrective action.  

chart 2

The market may now, as I’ve suspected, return to the focus on trade and tariffs. And that’s why the IMF warning Monday morning was quite timely, so we traders and investors keep our eye on the ball which we do care about on a daily basis.

And it’s not the soccer ball for Baron Trump (listening device embedded or not). The espionage charge against a Russian woman who tried to broker an earlier Trump-Putin meeting piques a bit of interest too.  

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