Small cap stocks continue to fall back further away from its large cap brethren. Volume was decidedly lower than yesterday’s level. It is always nice to get the market to take a breather after such a move like yesterday. Wednesday’s action was certainly the follow-through we were looking for while today’s breather is welcomed. It would be nice to see the market close out this week with strong gains with volume expanding. More probable than not we will continue the trend for this year with a down Friday. Stick with our current trend.
Active managers removed allocations to equities this week. The NAAIM index dropped below 60% as active managers continue to be gun shy about this market. AAII bulls and bears ended the week at 30% a piece. No real surprise after last week’s sell off. One thing is interesting is the events in Paris did not spook that many bulls from jumping ship. After the extreme sentiment readings in late summer we have yet to see the rebound back to where bulls were before the decline. The market is nearly there. While the market nears all-time highs sentiment sure is quite a ways away.
Everyone is trying to find hidden nuggets in the latest fed statement. Will or won’t they raise rates is the question and no one has the answer. Sure, we still believe they will not raise rates. Does this mean we think the market will go in a certain direction because they won’t raise rates? No. Heck, they could raise rates and do another round of QE. Price pays and it is what we pay attention to.
Stick with the prevailing trend. We still are seeing decent action in our names. One thing we are not seeing is any of our subscribers blowing up like the fellow who is more than 106k in the hole with eTrade. Trading without an exit and proper position sizing is insane. Now, we know the real consequences of not having a sound money management practice.
Have a great weekend.
