Another day of early morning selling giving way to mid-morning buying only to see gains fade into the close. This market continues to grind itself sideways and continues to really punch through in either direction. Volume was lower on the NASDAQ, but higher on the NYSE as summer trading is fast approaching. Bonds sold off today pushing yields higher as the dollar weakened across the board. Utilities followed bonds lower while XLY tried to move higher. Crude oil was higher by nearly 2% helped by the falling dollar as XLE is trying to recover from its recent selling. All-in-all for those who are long the market can point to a lower volume consolidation with small caps in the lead. On the other hand, bears can point to disappointing factor orders and the market’s reluctance to push back into new high territory. In the end we still have a long bias despite this lackluster uptrend.

Perhaps the story really should be the continued move higher for the Shenzhen Composite index. This is truly an amazing move this index is on. It has moved more than 50% in two months! Zero Hedge points out that more than 4.4million new brokerage accounts were opened as a sign of a bubble. We have no idea when or if this is a bubble. It is more probably than not the index is in a bubble, but trying to pin point the exact top is a fool’s game. The Shanghai has been unable to regain its all-time high, but the Shenzhen continues its tear. When bubbles do eventually pop they tend to be epic. Is our black swan the Chinese Stock Market bubble? Stay tuned.

2015-06-02_SZCOMP_Daily

We still do not have enough evidence piling up to make us bearish on this market. Sure, cycle theorists say we have negative bias and they could be right. We need hard evidence from our holdings and distribution in the market to really begin to jump to the bear camp. Even then we are simply following our process. There is no need for us to be a bear or bull, but there is a need for us to be on the “right” side of the market. At the moment, despite the rhetoric and bearish articles we remain long this market. If our exits begin to trigger and we see the market get hit with distribution we will adjust. Too often traders out think themselves and miss out on gains. We do not want to miss out on gains.

Steady as she goes here. No need to get excited one way or another. Our platinum members were able to take advantage of our intraday watch list with ZBRA breaking out of a tight formation. So, we did have a bit of excitement! Stay the course and cut those losses.