Stocks quoted in this article:
Despite a better-than-expected earnings season for U.S. corporations amid a backdrop of persistently bearish sentiment, news from Europe continues to be the primary driver of price action among domestic equities. Seemingly every morning, market participants awake to a new round of bad news, and the market gaps down on the opening bell.
Below is a chart of the price action of the SPDR S&P 500 ETF Trust (SPY - 134.76). As you can see, five of the last six sessions have resulted in nearly identical price action -- a gap down from the previous day's closing value, some price discovery near midday, and then a close above where the market opened.
Many European markets close at 11:30 a.m. Eastern, and this has typically been met with buying in domestic markets. There's no guarantee that this price pattern will continue -- but until markets can break out of their current range, this process of buying a lower open and selling the close should be repeated by active traders until the environment changes.
The downside of this type of action is that swing-trading indexes in such an environment can prove difficult. Picking individual stocks remains the preferred method of investing for those with time horizons longer than a few days.