Today was just another day and a new all-time high for the S&P 500. Volume on the exchanges ended lower across the board. An interesting tidbit was SPY volume was actually higher on the session. Today’s session certainly puts this market in extreme overbought conditions. While we recognize it can always get more overbought we are in a position where this market sorely needs to consolidate its gains. The rebound from October lows is nothing short of spectacular. All we can do is manage our signals and go with the market.
Sentiment has pushed back into bullish mode. We are not at an extreme, but we are pretty close. AAII Bulls closed the week up more than three percentage points to 52.7%. Bears dropped six percentage points to 15.1%. Bears are becoming extinct. II Bulls closed the week at 54.6%. II Bears remain at historic lows at 15.1%. Where are all the bears? NAAIM Exposure Index ticked up to 77.68. Remember, AAII Bulls never flinched in the month of October where the II and NAAIM or the so called professionals flinched.
Tomorrow we will get the all-important October jobs report prior to the market open. The only thing that would likely derail this market would be if we see a ton of new jobs being created and traders expect rates to go higher. I doubt we will see a print over 300,000 as we have not had one in quite some time. The release will produce some wild moves. Do not be seduced into thinking you can game the intraday swings post-jobs report. It just won’t happen. Ignore the nonsense.
Tomorrow will be interesting, but we will stay patient and act accordingly. Have a great weekend.
One is left with the impression that this market will go up indefinitely, punctuated periodically by 5-8% pullbacks. Buying those pullbacks has been the thing to do, but eventually this methodology is going to fail. It’s certainly gone on a lot longer than I expected, and even I bought a bunch of stuff during the last pullback’s bottom. But I’m slowly unloading some of it now…
Perhaps you have some data as to the market’s performance going forward when the historical level of bears nears ‘extinction’. As you indicated, it’s an overbought market. One that hasn’t had a severe correction in years, and needs it badly to flush out the excesses. But those excesses seem happy to make me look stupid, and the markets continue to rise. Stealth euphoria is still in play….
I completely agree with you, Jim, 100%.
Unfortunately, I do not have that data pesonally. However, I follow Ryan Detrick on Twitter and he has posted some data going back to the 80s on sentiment. The market usually does not do well with the crowd so bullish and the bears completely absent. However, this is QE world. History is irrelevant for now. Like you said, one day BTFD will not work and everyone will get crushed. Until then, BTFD (dips), BTFNATH (new all-time highs) and BTFATIB (anything in between).