Last Wednesday’s selling has been completely erased and the market is now back to all-time highs. Volume on the session expanded as traders continue to find themselves back into the market. What we heard last week was Trump was going to destroy the market and he was the reason the market sold off. What is the excuse for the rebound? To us, it does not matter as all we care about is the overall trend. One day does not make a trend and we are not going to get spooked out of our positions over emotions. Sure, Trump may somehow cause a crash. However, we are not going to base our trading upon whether this will happen. Trade on proper trade signals and cut your losses short. It has served us well and kept us in this market uptrend.
Sentiment continues to be a non-factor as AAII survey shows bulls just a shade higher than bears. Those who are neutral continue to dominate the AAII Survey. II Bulls dropped, but remain above 50%. Bears in the II survey vaulted higher by 1%. Of course, that is an exaggeration as only 18% of the respondents were bearish. Bears are not to be found anywhere in this market. Certainly, you have weak longs who bail on their positions at the first sign of selling. We are not weak holders and only exit our positions when our signals tell us to do so.
We do hope at some point we get a proper correction. A 2008-09 style correction is not what we are thinking, but one where the market declines 15-20% and we see proper setups again. At this point, it is anyone’s guess at what will take down the market. Is it student loans? Inflated real estate again? Sovereign Debt crisis? Crude oil did fall 5% after OPEC extended its production cuts another 9 months. What happens if Crude Oil falls below $40? We are not predicting it falls below $40, but we are seeing lower highs and lower lows with the commodity. The trend is lower and prices should continue marching lower.
There are plenty of stocks flashing signals and we are going to take advantage of all signals coming our way. We will continue to control our risk and exit to keep our losses small. We hope you have a great Memorial Day weekend. Stay safe and enjoy the long weekend.
