It was a day of new highs as the S&P 500 and Dow Jones Industrial average hit new all-time highs. The NASDAQ continues to hit multi-year highs. Russell 2000 remains weak and is not near its all-time high. Big Cap stocks have been leading this market higher and small caps continue to act weak. Outside of a small hiccup during the first part of today’s session the indexes remained near their session highs. Sellers were simply nowhere to be found. We are seeing divergences emerge here and we still have some distribution despite the new highs. Our models except the Russell 2000 are in buy mode, but as usual we are fluid with price.
The number of stocks moving to the upside with this market is not what you would expect. Our advance/decline line has not moved in conjunction with the major indexes. Another divergence is with our market leaders such as FB, TSLA, and NFLX. These three stocks have yet to reverse from their previous selling. QIHU and YY are two Chinese stocks unable to regain their footing. On the flip side BIDU was able to push higher today. Unfortunately, those like BIDU are few and far between. Then again you do have Dow stocks like MMM, TRV, and GS pushing higher. The money is flowing into Big Caps and continues to ignore small cap stocks.
This market is not going to make it easy for many. Just when you think this market is about to turn lower it jumps to new highs. The Federal Reserve has yet to raise rates and although QE is about to run dry rates should stay low for a considerable amount of time. What this does not mean is we automatically go down, but there is enough economic stimuli via low rates to keep a floor under this market. Until we see rates move higher this market still has an artificial floor underneath it.
Sentiment hasn’t changed much week over week. Bulls crept higher in the AAII and NAAIM Exposure Index. Bulls on the AAII survey pushed higher to by 2% ending the week at 42.2%. Bears moved lower by 3.6% ending at 23%. NAAIM Exposure Index finished at 67.08% up from 63.63% last week. Neither read on sentiment is at an extreme and we have not seen either at an extreme for quite some time.
Tomorrow’s option expiry will kick up volume and volatility in some select names. We will have to wait and see how things shake out tomorrow. Go out and enjoy the weekend.
