Investors Get Their Feet Wet, and Nothing More, in First Day of August

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The market was in wait-and-see mode on the first day of August. After a very strong run in July, conditions were good for some sort of pullback or consolidation, but the “fade” trade was just too obvious to work. There is a very compelling argument for some profit-taking, but there were some dip buyers lurking about, and the sellers were unable to generate any sustained momentum.

Under the surface, the action was lackluster, but not overtly negative. Oil led to the downside, and breadth was around 3,800 gainers to 4,400 decliners. There were more new 12-month lows than new 12-month highs, but both numbers are very low.

Speculative traders are squeezing a few names and moving some junk, but the pockets of speculative action are very narrow, with just a few dozen 10% movers.

Mixed action like this is what the market needs to set up another leg higher, but what we have seen with other bear market bounces is that if the momentum does pick up fairly soon, a rollover can gain some steam.

The market could have found some good excuses for selling off Monday, but the planned visit by U.S. House Speaker Nancy Pelosi to Taiwan was ignored, and overseas economic news didn’t have any impact.

We just have to wait and see how things develop from here.

Have a good evening. I’ll see you tomorrow.