Dante’s version of the state of limbo is the best way to describe the stock market, which is anchored in a tight trading range. Perhaps it sounds too hyperbolic to describe the tight and uncertain gyrations of recent sessions to the first circle of hell while watching this market essentially move sideways. This creates the kind of anxiety that would exacerbate a sell-off or an upside breakout.
With that being said, I have been impressed with how many times the market has been able to climb off the canvas, including Friday’s session that saw the Dow Jones Industrial average tumble more than 100 points, only to slowly claw its way back. It seems to me that smart investors understand if key support levels fail here, stocks could be even cheaper; maybe they are too worried about the degree of panic selling that could occur.
The breakout comes with a close above 18,600, while 18,000 is still a critical support point.
Dow Jones Industrial Average
If the market is to breakout, it needs a catalyst between now and the next jobs report, and maybe a wave of takeovers could do the trick. The Wall Street Journal reported on Friday that AT&T (T) and Time Warner (TWC) are in talks; indeed, the $85 billion acquisition of the parent company of HBO and CNN was official over the weekend. Interestingly, I am not sure either presidential candidate will okay the deal with Trump saying flat out no or Clinton saying that her administration would look closely into it; I didn’t see that coming.
There are additional deals in the rumor mill, and while we might not see the kind of bidding wars that stoke the Street, it’s clear that old deep-pocketed media is moving fast to remain relevant.
At this point, I have come to believe that even Twitter (TWTR) could fetch a bid; late Friday, the shares soared on scuttlebutt that Softbank Group (SFTBY) is ‘kicking the tires.’
Non-media names in the rumor mill include the following:
- (TRIP) Trip Advisor
- (Z) Zillow
- (COH) Coach
Moreover, if takeovers don’t pop the market, then maybe earnings will as some big names are up at bat this week. Either way, the grind is wearing thin as it’s mirroring the presidential campaign.