From the Trading Desk

Dow Winning Streak Continues as Volume Expands

Once again the Dow was able to close higher as volume jumped on the day. It was nice to see volume expand above Wednesday’s level. However, volume remained well below its 50 day volume average. We can’t have everything. Jobless claims fell less than expected a sign perhaps the labor market is improving or there just aren’t that many people working to sustain a high level of job losses. Producers prices came in as expected. It appears we have carbon copies of intraday action with this market. We near lows of the session around 2pm EST only to find buyers pushing us back to the highs of the session. Sellers simply cannot find any footing to sustain any pressure. Thus, we have a lack of fear as seen with the VIX hitting another 6 year low. More gains in our uptrend and we aren’t about to argue with the market.

Sentiment has swung back in the favor of the bulls with every sentiment survey showing a healthy amount of bullishness. While we do have quite a bit of bullishness we aren’t at extremes. One extreme we are at is with the II survey showing bears at 52 weeks lows. The reading of 18.8% hasn’t been seen in quite some time. AAII bears register at 32%, but the individuals in this survey typically flip flop and is difficult to get a solid reading of sentiment. On the other hand, the II survey of professionals tends to be a bit more smooth and reliable. NAAIM survey showed the positioning of its members fell a bit, but still well in the bull camp. We aren’t in extreme territory for the bulls, but with II bears in an extreme territory may at the very least signal a short-term top is nearing.

We simply cannot know whether or not today was the high of the year. There are plenty of signs this market can still go higher despite the risks involved with endless QE. Inflation, so far remains tame and we’ll get a reading of CPI tomorrow prior to the market open. If you have gone to the gas station and/or grocery store you know prices have been steadily rising. However, I doubt these price increases make their way into the figure tomorrow. The government uses techniques to distort the truth in the inflation figures. Any hints at a possible early end to the Federal Reserve’s QErever plan may scare the markets. Anything is possible and if you follow price and leading stocks your trading results will be just fine!

Make it a great weekend and as always cut your losses short.

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