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Dull the Day May Be, Better Stay Ready to React

Conditions were good for a dramatic day of market movement, but it turned out to be rather dull after the opening bell on Monday.

Many market players were still reeling from the eruption in the trade war with China that sent the Dow Jones industrial average down 623 points on Friday. Overnight futures were trading sharply lower as it looked like negotiations had completely broken down.

Although it is unclear who said exactly what, both the Chinese leadership and President Donal Trump dialed back the rhetoric and that put a bit under the market prior to the open.

There was still plenty of skepticism about the potential for progress on trade, but it stemmed the immediate fears and forced overly aggressive bears to lay off for now.

The S&P 500 closed the day slightly higher than it opened, which illustrates that there was a lack of buying momentum. There was a little buy program at the close that pushed the indexes higher, but it was not a day of chasing out of fear of missing out. The bears had even less success trying to fade the strength.

The action in the indexes didn't do anything to change the technical picture. All of the major indexes are in the middle of their recent trading ranges, with significant overhead resistance and some key underlying support.

The bearish narrative is more compelling than it has been in a while with the China trade drama, fear of a slowing economy and doubts about the effectiveness of central banks, but those sorts of worries have tended to favor the bulls more often than not.

For now, we need to watch the key support and resistance levels. Many market players are fearful of surprise tweets like we had on Friday from President Trump, but that can cut both ways. Trump is obviously concerned about supporting this market and appeared to have that in mind with a number of his comments Monday.

At this point, the best course is to see how the action develops from here and stay reactive. The likelihood is that a surprise news event is going to determine how the market breaks out of its current trading range.