From the Trading Desk

Small Caps Inch out Gains as Broader Market takes a Breather

After many, many headlines the GOP’s tax cut plan was passed. Every day we were bombarded with headlines regarding the tax cut. Whether or not any of the promises or worries comes to fruition is another man’s guessing game. For now, stocks have been on a big run showing very little signs of letting up. One thing to put on notice is certainly JNK and HYG. Both are showing weakness and may be foreshadowing some hiccups. Despite any hiccups from a historical stand point we should continue this impressive run. While we could argue valuations are too high or we have record low volatility the fact remains this market is continuing its push higher. Until we see weakness from holdings and distribution days there is no reason to think we can’t continue higher. Stick with the plan. We have our stops in place to protect us from the downside and are positioned to take advantage of any further upside.

There is no need to be a hero in this market. Tough to really get too excited either way as this market shakes off selling like water off of a ducks back. However, we are a bit stretched to have supreme confidence in huge upside from here. Small gains are likely to continue, but there are areas like Blockchain companies producing huge moves. This does have some similarities to dot com companies in the late 90s where simply changing your name resulted in MASSIVE upside for the stock. We are believers in the Blockchain for the long haul. We will certainly see a correction/consolidation in the space where the true winners will reveal themselves. For now, enjoy the ride!

Sentiment on the AAII reading is quite bullish. First time in some time we have seen the number of bulls reach 50%. Bears are still not below 20%, but sit at 25% and neutral responds are just above 23%. No real surprise as we continue to see the market fight off anything resembling selling. It is quite amazing and while we’d love some sort of correction to reset stocks we will not complain about gains. NAAIM exposure index rocketed to 109.44. The Bearish reading was a +75. Interesting to see a plus reading in the Bearish column and it certainly is signaling the NAAIM as a whole is incredibly bullish. Take it for what it is worth. The crowd is certainly bullish!

As we roll into the holiday weekend we hope everyone has had a tremendous year. We are looking forward to a great 2018 with everyone. Whatever this market is going to throw at us we are going to be ready for it.

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