After Wednesday’s close Ben Bernanke back pedaled from his taper fantasy. Stocks enjoyed the renewed effort by the Fed Chairman to continue to pump money into the market. Economic data was essentially ignored by the market as the only thing that matters at this point is if $85 billion will be pumped to the market. Volume ended higher than Wednesday, but it was below average. Today was a confirmation of a new market rally due to price and volume action. However, waiting for confirmation had you missed a 5% move from the most recent low. Hard to argue with new highs here and it is quite likely we’ll continue to push higher.
Sentiment is an interesting thing to note here. AAII survey is quite bullish with Bulls coming in at 49% while Bears only register at 18%. Bears are at an extreme where bulls aren’t quite there. Does this mean we have a top in place? Far from it, but we’ll let the market price dictate our next move. NAAIM sentiment survey did see the index move near 50% invested from the 30s last week. However, it was not near its high set back earlier this year at over 100% invested. Of course if you visit any other chat room you have your bear crowd either short or in cash. Perhaps this time the AAII survey respondents have it right.
There were quite a few breakouts today and is something nice to see alongside a follow-through day. However, if you were waiting for the market to confirm a rally rather than focusing in on stocks you were left behind. While it is likely you can make headway, the M.O. of this market is to shake out those who chase the market at new highs. In fact, those who chase the breakout are shaken out only to see the market reverse back into new highs. It is not for the faint of heart and when you do not have sound rules in place these whipsaws will do a number on you. Don’t fight it.
We have noticed quite a few people back in May (5/22 to be exact) call the precise top of the market. Today’s market has put that theory to rest for now. What we have seen for the past few months is you should not be calling market tops.
Ride those winners. Have a great weekend.
