Irony is a word a writer can love, true, but as a concept, most anyone can appreciate it. I find the market unsettling, which I find ironic. The irony here is in the process of settling into its new higher levels, the market is acting unsettled. Although I don’t like the way the market is behaving right now, I understand why it is trading the way it is trading.
Summer often brings on a state of “quiet.” Traders and investors are people too. They need time off. They need a break. They need to vacation with their families. In short, many are gone at this time of the year, which reduces the volume, which is another reason I find the market unsettling, aside from the fact that it is adjusting to its new levels.
When the volume is low, the price-action is less reliable. Trading is more difficult because I lack confidence in the market. I tend to sit out more, watch more, trade more tentatively. I find myself reading more, looking for new opportunities rather than playing old opportunities. I also find myself outside more, gardening, building, and generally taking care of household business. I guess, in the end, I too take it a bit easier in the summer. I guess I just go with the market flow.
- While the economy is not taking off, companies are profitable, swimming in cash and actively buying up their own shares and increasing dividends.
The above sums up the market reality nicely, and even though the market is flowing through the quiet of summertime trying to find its place, underneath that flow is the above and when the flow picks up again, this reality will emerge. Traders and investors will want to get their money working again and as long as the above is true, equities will benefit.
I say equities because money seems to be flowing out of commodities this year.
- Investors pulled $4 billion from U.S. commodity exchange-traded products in the first five months of the year.
This follows up a negative trend that began in 2013.
- In 2013, more than $33 billion left commodity exchange-traded funds, notes and mutual funds for the first annual net outflow in 12 years, according to Lipper, a division of Thomson Reuters that tracks nearly 180 U.S. exchange-traded commodity funds and products.
If investors want to get their money working, and they don’t want commodities, what is left? Bonds? Perhaps, but if the economic and Fed environment continue as they are, bonds are not a particularly attractive way to make your money work. Just ask Mr. Gross.
No, equities are left and the reason equities will hold favor is the environment is favorable (yes the Fed helps here).
- Factory Orders rose by +0.7% in April, which was above the consensus for an increase of +0.5%. The March number was revised higher to +1.5% from +0.9%.
Maybe I too am unsettled. Maybe I am not comfortable with my reality, which is as I described above – lacking confidence in the market, trading less, making less money. I guess I find that ironic as well. I am unsettled, the market is unsettled, and both of us are settling into our realities of being unsettled. I don’t know. Maybe it is not irony; maybe, what we have here is reality. The market and I are both just flowing through the summer.
Trade in the day; invest in your life …
