Just as fast as the market goes down it can go back up.  The NASDAQ 100 led all indexes higher, but the Russell 2000 lagged as buyers favored large cap stocks.  Volume was up across the board in a good sign institutions were willing and able to participate.  All around solid day for the market and one we cannot argue with.  We must accept the volatility as the norm and adjust accordingly.  Tomorrow’s job report will be the most important one since the last.  Unless it is a blockbuster number it is hard to imagine this market not liking the number.  This market has turned a corner and no we wait patiently stalking our prey.

Sentiment did come in from last week as the market fell.  It is quite natural for a few scared bulls to flee town.  AAII bulls dropped from the 50s back to 41% while Bears jumped from sub 20% to 27%.  NAAIM Exposure index dropped from the 90s to 71%.  Nothing too extreme, but perhaps sets this market up for another run to new highs.

Earnings season is just right around the corner with Alcoa kicking off the season on Monday.  It is important to make sure to be aware of earnings date.  Position sizing is important here as we have seen over the last few earnings seasons how volatile stocks can get.  The name of game is controlling risk.  Taking on too much risk during earning season can be a dangerous game of Russian roulette.  Risk management is an integral part of your investment process.  Make sure you have a plan and a sound risk management process to handle any volatility this market can dish out.

Not much surprises us these days with this market.  We just saw the market pile up distribution days only to see it revert back to an uptrend in only two sessions.  Given how other pullbacks have gone there is no reason not to think we cannot hit new highs.  This volatility can shake the confidence of many and having a sound process will help you avoid any slip in confidence in the system.  Execute and the noise will fade away.  Have a great weekend.