Despite disappointing economic news stocks were able to rebound in healthy volume. The S&P 500 and Dow Jones Industrial averages regained their respective 50 day moving average. It was a very good sign the market was able to retake a key moving average especially with higher volume. We have avoided further downside for now and given the volume coming into the market today certainly points to a positive sign for further price gains. After six straight days of gains the US Dollar index took a breather and perhaps helped out our stock market. A positive turn of events for the market and we are finding more longs. No need to out-think this market and roll with what we are given.
AAII Bulls dropped to their lowest levels since July 2014. Ending in the low 30s this week bulls were scarce. Even more scarce were bears remaining in the mid-20s with those responding to the AAII survey as neutral market outlook ended above the 40%. Interestingly enough the NAAIM exposure index sunk to 65% long with a few managers even 200% short. A few at least remained at 200% long, but it is rare for managers to rush to being 200% short. Hard to imagine being 200% short here given the move in the market today. Follow the trend.
Today’s big move does clear us from oversold levels in the market. We really never got extremely oversold during the recent pullback. It is a positive development we were able to recover back above the 50 day volume average. Any time you see the market recapture this key moving average with volume is something you have to pay attention to. It certainly does not guarantee we will hit new highs, but it is an important step for this market to take. Stick with Big Wave Trading and we will navigate this market together.
The rise in the US Dollar should still provide a headwind at some point, but can stock buybacks continue to support this market? There are a lot of questions still to be answered, but we will focus on our price signals and focus on our risk management process. These questions will be answered at some point and it will be too late if you wait for them to be answered. Have a great weekend.
