A regurgitated headline was a great excuse for traders to trip over themselves to drive stocks off their lows. Another OPEC headline of a production cut was an easy reason for stocks to rally. The headline came just as the S&P 500 touched 1812 a key technical level. Play conspiracy theory and you can go down a rabbit hole you may not come out of. Volume was big on the session, but failing to close in positive territory shows this market has a long way to go. While the last hour and a half was volatile we still do not have confidence this market can sustain anything to the upside. Cash is still king.
Perhaps one thing this market has going for it is the number of bulls has dropped off a cliff. AAII bulls dropped below 20% to 19% for the week. NAAIM exposure index ended the week just above October lows and August lows. AAII bears climbed to nearly 50%, but have yet to reach extreme levels even after the terrible January start. While sentiment is at a level where a reversal is likely we still have not had a day where we see capitulation. Perhaps we won’t, but we continue to see rallies fail and no signs of strength. Stay patient.
Tomorrow is the last trading day before a long weekend. It will certainly be interesting to see how the market reacts to a long weekend. We are still searching for a tradable bottom. Right now, there are too many charts suffering major damage. There are a very select few beginning to form proper right sides of their patterns. When we do have signs of a tradable bottom these patterns should prove profitable. Before we jump aboard we need to be in a power position. The market continues to keep us from a position of power to hit the long end of the market.
Enjoy the long weekend and Friday’s market action!
