For all the posturing, conjuring and theater that the markets make available to viewers on a continual basis, this past week gave spectators absolutely nothing. The markets went up, making those of us predisposed to bullish thinking assume the jovial position. The markets went down, making those of us predisposed to bearish thinking assume the emboldened position. The S&P ended the week down 1. Not 1 percent, but rather 1 point.
It seems we have entered a phase of the market where we are in a sideways range, within a sideways range that is further within a sideways range. We are sideways on a yearly basis, as 2014 has been more or less flat. We are sideways on a quarterly basis, as Q2 has been more or less an exercise in accomplishing nothing for the markets except a wide variety of predictions by its participants. We are sideways on a weekly basis, as previously discussed. We are sideways on a daily basis. Even the intraday action was sideways, as the markets went up a bit, down a bit and ended up going nowhere.
This type of indecision typically gives way, in a rather sudden fashion, to a new short to intermediate term trend. In my case, I believe that trend will be to the upside as discussed last week.
The sideways nature of trading changes nothing in the hearts and minds of investors. If anything, it makes them more resolute in their prevailing beliefs. The wonderful part of sideways price movement is that you can assign any variety of indicators to the movement and determine for yourself whether it is bullish or bearish. In other words, a sideways market puts most popular means of determining a bullish or bearish trend in a compromised position. Due to the fact that they are compromised, it is incumbent to the operator of the indicators, whether fundamental or technical, to exercise an increasing amount of interpretive analysis that typically falls along the line of the prevailing bias of the operator.
Sideways markets don't change minds, they just create a further hardening of them that will only give way when the dam breaks.
I will post some interpretive analysis of a bullish bias tomorrow.
