Small cap stocks led the market lower today in lower trade. Jobless claims fell below 300,000 for the first time in a long time! Perhaps it is a reflection of a shrinking workforce than job growth. Import prices fell more than expected. There wasn’t too much excitement this week from Economic Data and outside of Jobless Claims it has been a dull week. They S&P 500 did end its win streak at 7, but a low volume pull back like we had today was important for this uptrend. Until we see the pile up of distribution days or severe price destruction this market is poised to continue higher.
An argument that is being made against the market is next week’s FOMC meeting and the taper. Now, we do not know what the fed will say regarding the taper. Nor do we know how the market will react. What we do know is this market has not shown the usual signs lower prices. This market has not flashed a follow-through day, but we have seen quite a few above average solid accumulation days. In addition, we have stocks like YY, YELP, CBS, NQ, and more looking great. Our situation may change and if it does we’ll react, but for the time being it appears this market is poised to push higher.
Last week’s rally certainly boosted stock market bulls. Sentiment has pushed toward the bull camp with the number of AAII Bulls recorded at 45.52% and bears falling to 24.58%. Let’s point out these are not at extreme levels, but are near extreme levels. NAAIM manager survey average market long/short exposure ended this week at 66.75%. This is well off the highest recorded reading and below what we’d consider extreme. Sentiment certainly is an imperfect indicator and pales in comparison to price. However, at extremes it certainly can point out where irrational exuberance may exist.
Retail sales and PPI data is set to hit the tape tomorrow morning. It’ll be interesting to see how Autos and Housing move the needle. Will higher rates do any damage? We’ll find out tomorrow.
Have a great weekend. Ride your winners.
