Once again early morning futures indicated a rough opening for US equity markets.  Fears concerning Europe and Ebola certainly played a role in the early morning futures’ prices.  Just like yesterday we saw buying from the onset.  Buyers were eager to accumulate shares at the morning lows and were being led by the Russell 2000.  For the second straight day buyers flocked to small cap stocks.  The Russell 2000 is now is in its second day of an attempted rally and we will be looking for a confirmation day shortly.  Today’s action was certainly bullish once again and it would not surprise us if this would continue to push higher.  This market is not out of the woods just yet, but we continue to see positive signs a rally may be imminent.

Outside the positive reversals we have seen from the market as of late there are other positive signs.  First and foremost is the VIX index showing a tremendous amount of fear.  Yesterday we saw the index spike above 30.  Typically, after such a large spike above 30 we have a great opportunity ahead of us.  While this does not guarantee an immediate rally, but at some point we will see an opportunity to cash in on this market.  The key is to stick with the process and execute when signals present themselves

There are a lot of interesting things about this market and one of them is how sentiment has changed.  Let us clarify sentiment has changed only for so called “professionals.”  While the panic among professionals is quite evident, but individual investors never flinched.  AAII Bulls jumped to 42% while Bears moved to 33%.  Not what you would expect after the selling this market has experienced as of late.  NAAIM exposure index hit a multi-year low of 9%.  II Bulls dropped to the mid-30s.  If this market rallies expect to see sentiment rise along with it.

Tomorrow we will have to contend with options expiry and the volume that comes along with it.  The Russell can confirm a new rally tomorrow although day 3 confirmations are rare.  We would prefer the market tighten up then run.  Regardless of what happens we will simply go along for the ride.

Get out and have a great weekend.