“It doesn’t matter what you say you believe — it only matters what you do.”
— Robert Fulghum
The last two times the market dipped on fears over North Korea were great buying opportunities. A week ago, the indices gapped down when a missile was fired over Japan, and they have gone straight up since then.
The latest news about a North Korean nuclear bomb test is already being dismissed by the markets in Europe, which have barely pulled back and are trading in positive territory. The rest of the world has already had an extra day to process the news, and it is being dismissed once again. The futures in the U.S. are still negative, but the losses look small at this point.
If a nuclear bomb test in North Korea can’t derail this market, then what will?
The bears are hopeful that the negative seasonality of September will have an impact, and they are still hoping that more hawkish central banks and a failure of Trump fiscal policy will final start to matter, but those issues have not gained any traction in this market recently. The bearish arguments are easy to make, but simply haven’t mattered.
The only thing that matters in this market is price action. The price action is positive, and has rendered all news irrelevant. It is as simple as that. The computers are programmed with a bias to buy, and any news that causes a dip is just an opportunity for better entry points.
What so many bears fail to recognize is that they can’t time a market top based on fundamental arguments. Barron’s, for example, has an article this past weekend that states: “after an eight-year climb, stocks are pricey, rates are rising and the world is in turmoil”.
Trump has his hands full with North Korea.
The bearish logic is compelling and hard to dispute, but that has been the case for years now. We have heard over and over about how valuations are stretched, the central banks are less accommodative and Trump’s fiscal policy is going to fail. Yet the market just keeps on chugging along. Even the provocation of North Korea barely causes a hiccup.
This uptrend will end one of these days, but the best way to determine when isn’t the news headlines, but the price action. When the price action shifts, that will be the time to focus on explanations.
Not only is the market mostly ignoring North Korea this morning but another big deal, this time in aerospace between United Technologies UTX and Rockwell Collins COL, is boosting the mood.
The indices are indicated lower in the U.S., but this is a classic “buy the dip” opportunity again. Whether the indices hold up after the automatic dip buying is going to be the question. Europe has followed the pattern again, but you have to wonder if it is too obvious to keep working the same way.
I have some index shorts that I will partially cover this morning, but I’m staying extremely selective with any new long buys.
(This article originally appeared at 7:00 a.m. ET on Real Money, our premium site for active traders. Click here to get great columns like this from Rev Shark, Jim Cramer and other writers even earlier in the trading day.)
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