A surprise from third quarter GDP with the release showing the economy grew by 2.8%. Expectations were for the economy to grow only by 2%. However, all attention would be on Twitter’s first day of trading over on the NYSE. Just as the stock would open sellers got to the market knocking it lower. Small cap stocks are leading the way lower with the NASDAQ not too far behind. Breadth has been weakening and today was no exception. Leading stocks continue to take it on the chin and price action has been leading us to add to inverse ETFs. We have moved into neutral territory and are no longer in an uptrend. Until we see evidence otherwise we’ll remain neutral.
There have been some devastating moves in leading stocks. Stocks like TSLA, SCTY, YELP, TRIP, and NDLS to name a few have been hit hard. It will take some time to repair the last few days of trading. TSLA continued to slide after it disappointed the street with its outlook. The stock has had a great move for the year and if you don’t have a plan on getting out you are seeing your gains evaporate. The stock may come back, but for now we do not have any signals to get long the stock. Leading stocks have been lagging quite badly for a while now and it appears it has caught up with the entire market.
Sentiment from AAII and the NAAIM show a bullish bias, but not at extremes like the II survey showed this week. AAII bears ended the week at 21% while bulls sit at 45%. Neither figure is at an extreme, but has remained tilted to bullish for quite some time. NAAIM showed there were no bearish bets placed by the investment managers they surveyed. The level of bullish bets decreased to 84%. We aren’t calling a top here, but coupled with our price action it wouldn’t surprise us if this correction lasted a bit longer. If price action changes we’ll act accordingly.
Tomorrow’s job report will be fun to see how the market reacts. Any hint at a positive number will have the Taperheads out in full force. Taper talk heated up today and tomorrow we’ll see if it will continue. Have a great weekend!
