During the early morning the market was given a dose of economic news coming in mostly inline with expectations. Pending home sales were much better than expected, but the Kansas City Fed manufacturing index contracted coming in well below expectations. Given the economic news the market was able to push higher into the late morning trade. However, the early morning highs hit would be it for the day as the major market averages were able to retake their 50 day moving averages. Unfortunately, the party would not last as the S&P 500 was rejected at its 50 day and finished more than 6 points below the moving average. The Dow suffered the same fate, but the NASDAQ was able to hang onto its moving average. This 3-day rally has lacked volume and now with rejections at key moving averages lowers the probability we may have a new rally on our hands.
It would have been great to see all the major moving averages move above their respective 50 day moving averages. Alongside the NASDAQ the Russell 2000 was able to move above its 50 day nearly closing last week’s gigantic gap. It is nice to see the small cap stocks lead this market and it is an important sign. We’ll need confirmation from price and volume for us to really jump aboard this attempt at a rally.
Bearish sentiment has crept into the market. Even with the market decline the number of bears we see from the AAII survey is somewhat low. 35% of respondents were bearish for the next 6 months while 30% were bullish. Typically after any type of move below the 50 day moving average the number of bears tend to jump significantly. Not so this week. NAAIM Investment Manager Survey showed a decline on bullish bets on the market. But, it appears given the data more Investment Managers moved towards neutral than bearish.
