With another soft open this morning, market players looking for a deeper pullback either because they are short or in the hopes of buying lower are expecting the selling to accelerate to the downside as the session progresses. Despite how tedious it may feel to sit through trading sessions like we have seen this week, the overall trend still points higher according to the most basic of technical indicators, such as rising and smartly lined up daily chart moving averages in the major indices.
One thing to keep in mind about uptrends is that plenty of individual trading sessions tend to open weak but finish strong. That is usually a sign that retail traders are rattled by the early weakness and sell into the downticks, after which institutions swoop in to claim those shares sold, and then some. So, that is certainly a scenario I am curious to see if it plays out.
The materials and energy stocks are pulling in some more this morning, though both the XLB and XLE sector ETFs remain above last week’s breakout point. In addition, the transports are the clear laggards again, continuing with their vicious price swings over the past few weeks, though the session is still early and I would not write them off as another breakdown yet. On the defensive side, the healthcare and consumer staples are seeing some early inflows.
In sum, the pullback off the highs from last week continues to be contained within the context of an overall bull run. Just as knowing which side has the burden of proof in a criminal case is important, here in the market the bears have the onus on them to disprove the current uptrend.