Today was quite an uneventful day with stocks trading in a relatively tight trading range as volume slumped day over day. Pending home sales did not disappoint with Month-over-Month and Year-over-Year growth was certainly a pleasant surprise to the upside. Earlier claims figures disappointed, but when has the market cared about jobless claims? Utilities ended the session higher along with Materials and Healthcare while Industrials were the worst performing sector in the S&P 500. Dow Transportation index continues to act weak, but was able to hang above yesterday’s low. Tomorrow we will get a huge boost in volume at the end of the session. This market just cannot find a way to follow-through in any direction. While this is neither bullish, nor bearish it does speak to the lack of conviction of many market participants. We remain skewed to the long side of the market with proper exits in place.
Sentiment remains a funny indicator as of late. AAII still remains mostly in the neutral camp. AAII Bulls crept higher by 2 percentage points to 27% while bears remained at 25%. Those who were Neutral fell to 48%. Individual investors remain on the sideline. NAAIM exposure index fell 2 basis points from 67% to 65%. Given the choppy nature of this market it does not surprise us to see sentiment remain relatively the same week over week.
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KORS has been on the decline for quite some time. It released earnings yesterday and the market simply did not like it. While it would have been nice for those who went long prior to earnings it simply was not a good idea. KORS was in a prolonged downtrend without a sign of it turning around. Stay away from catching a falling knife and stick with a time-tested process like ours.
At this point the only negative about this market is the price action in the Dow Transportation index and the Russell 2000. An interesting thing to point out is tomorrow is the day Russell takes a snap shot of the market and rebalances its index for later in June. Healthcare stocks are interesting because they have moved the most and will demand a higher weight in the Russell 1000. Does this situation create a short-term catalyst?
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