US stocks fluctuating between small gains and losses Wednesday as investors digest Japan’s move to halt the yen’s rise. But the indecisiveness continues a broader trend this week as investors haven’t shown much conviction for stocks in either direction.
Yesterday’s trading featured some puzzling relationships, Art Cashin at UBS noted in his morning note. Treasurys rallied, gold rose sharply — typically signs of moves to safety, but the dollar weakened. Meanwhile, stocks waffled between plus and minus territory throughout the day.
“By early afternoon, traders were looking at the tape like it was a Picasso painting,” Cashin said. “For equities, the net result was yet another low volume stall at the top of the trading range.”
Now, Cashin sees the market approaching a “very critical inflection point,” especially as S&P 500 stalled Tuesday right below the top of its three-month trading range for a second-straight day.
S&P 500 recently up 1.5 at 1123. Cashin said resistance could come in the range of 1129 to 1132, while support exists at the 1111 to 1113 level.
The indecisiveness over the last few days comes as stocks have steadily churned higher this month, gaining more than 5% in September, historically the market’s worst-performing month. But amid the run-up, market sentiment has been a bit schizophrenic, Yves Smith wrote on her “naked capitalism” blog.
From recovery optimism, to fears of the economy double-dipping back into recession, and back to a more positive outlook, investor mindset has widely shifted back and forth recently, she noted. The consensus now seems to believe August bearishness was overdone.
“The other shoe may be yet to drop,” Smith said. “But until then, institutional investors can’t afford to stay too far from the herd, and the herd hates to bet against growth for very long.”