A big rally once again helps push the major indexes higher. The NASDAQ 100 was the clear winner with NFLX, BIDU, and CSCO posting big gains on the session. CSCO jumped to a new high on the back of an earnings release. Volume ended the session lower as buyers lost a bit of steam after a v-shaped ramp off of last Friday’s lows. It would be very nice for the market to put in a few days of consolidation here. The most important thing is for us to have our stops in place and ready for whatever the market may throw at us. There is no telling if this confirmed rally will last long or not. As long as we avoid distribution here and quietly consolidate we should see this market continue higher.
Sentiment flipped back to the bullish camp this past week. The AAII survey showed bulls jump back to the 40s ending the week at 48.52%. Bears fell to 21.41%. No real surprise after Friday’s big reversal. Since the lows on Friday this market hasn’t looked back. Active managers still seem a little reluctant to fully commit to the market as the NAAIM mean exposure to equities ended the week in the 60s. It wouldn’t surprise us to see the number get even more extreme if this market rallies back to its all-time highs.
Everyone is trying to be the first to claim we are either out of the woods or not. We have seen quite a few traders staking a claim the low is in and new highs are around the corner. It would be great to see the market hit new all-time highs again, but we must be ready for anything this market can throw at us. A distribution day heading into the long weekend here would not be ideal and would certainly sour this confirmed rally. A distribution day on the second day post a follow-through day does put the failure rate of the follow-through day at 75%. A distribution day the day after a follow-through day all but guarantees a failed confirmed rally.
We are going to take this market one day at a time. Stick with your risk management process and keep grinding.
