After a shaky start to the session the stock market was able to find its footing confirming a new uptrend. A solid day all around for the stock market with volume higher and solid price gains. ECB announced its QE program to the tune of 60 billion Euros a month. At first the market seemed unimpressed and even appeared to head lower. The selling did not even last 20 minutes as buyers rushed in and pushed stocks higher. We did not get the confirmation until after 2pm when buyers pushed the market to the highs of the session. Given our new confirmed uptrend we will operate as such.
We will certainly look for this market to push into new high territory after today’s move. The only red flags we will be looking for is if we get a distribution day over the next two days. This is why we cut losses, but we simply do not want to miss potential upside. While not cutting losses is a cardinal sin missing an opportunity on the upside is just as important. Do not fear and have faith in the trading process. Risk management plays a key role and you must trust the process. It is time we prepare for further upside from this market.
Sentiment changed a bit week over week. AAII Bulls dropped nine points to 37.1% and Bears jumping over 9 points back above 30% to 30.8%. Quite the jump in the number of bears week over week. But, the jump just put the group above 30%. It is not like we are seeing 40%, but we did see some fear creep into the market. NAAIM exposure index dipped back into the 70s. Not a big surprise and far above where we were back in October of last year. Perhaps more importantly than sentiment was the fear index–the VIX. For the 2nd time in two months we have seen the VIX index above the 20 level. While sentiment readings have not been bearish, the VIX index showed fear.
Do not let an opportunity pass you by simply because your opinions get in the way. Cut your losses and ride those winners. Have a great weekend.
