Early morning selling gave way to buyers as this market continues to shake off potential distribution days. Volume ended the day on the downside today, but with options expiry tomorrow we should see volume jump. We continue to see what appears to be an overbought market from a daily view continue to act strong. Today was no exception and when you see intraday support like we did today it is hard to argue with this market. The lack of distribution and a pile up of broken leaders tells us this market may still have some legs left.
It does feel and look crazy to see this market continue to push higher. This is not a normal market despite not having any free liquidity from the Federal Reserve. We still have ZIRP and companies continue to borrow money to buy back their own stock. Why are they not investing in research and development? It is a great question, but with the artificial buyers from low rates it does help keep this market afloat. We are overbought and will likely continue to stay in this environment until something changes. We have yet to see a change. Therefore, we will continue to stick with this uptrend.
It is Thursday and we take a look at sentiment. A surprise perhaps this week was a tick lower in sentiment this week. Bulls dropped in the AAII and NAAIM while in the II survey they held steady. AAII bulls dropped 8.8 points to 49.1%. Bears ticked back above 20% to 23.8%. NAAIM exposure index dropped from 85% long to 72% long. There were still some managers who are 200% long despite this massive run up. II Bulls ended the week at 56% and it is not even worth mentioning the bearish percentage. While the bulls are in control of sentiment they are not at frothy levels.
This week typically has not been kind to stocks historically, but we have a shot at ending the week in the green. We continue to see traders get cute and try to anticipate a market turn. What you think is much different than reality. Stick with Big Wave Trading.
