Now that we have moved beyond the FOMC Friday’s job report hits front and center. The NASDAQ was the only major index we follow closing in the green. We continue to see earnings pour in, but not too many to really speak of. The mass financial engineering project we have been in since ZIRP and QE have been implemented has certainly helped our current situation. Now, with the FOMC trying to exit from its policy it’ll be interesting if we can sustain the momentum. This market continues to operate without a follow-through day which is fine, but it simply highlights we aren’t in a market environment friendly to big stock gains. Tomorrow will certainly be entertaining, much more than today.
Sentiment continues to lean towards the bullish end of the spectrum for so called professionals. The NAAIM Exposure Index as well as the II survey shows a heavy slant towards the bulls. II survey saw the number of bulls move higher to 55%. Bears are still hovering around 20% coming in at 21%. NAAIM Exposure Index showed a bullish bet of 82%. While the index isn’t above 100% like we saw at the beginning of 2013 it is still super bullish. AAII continues to favor the Neutral respondents. Bulls came in at 30% and bears at 29%. Almost a majority of AAII have a neutral stance on the market over the next 6 months. 41% say they are neutral. Certainly, the two extremes from the professional versus retail side is interesting to note.
We have been discussing whether or not the VIX does a good job catching complacency or not. Sure, you can buy puts on sector and industry ETFs that wouldn’t show up on the VIX. However, if you are a big shop there isn’t the size needed to protect your downside. The big boys still use index puts (see George Soros short position) and this still shows up in the VIX. What we are seeing now is that the VIX shows very little concern over the current market. The index closed at 13.25 and hasn’t closed above 20 since February. Doesn’t appear too many are worried about this market and perhaps something we should take note.
The Russell 2000 followed by the NASDAQ are the two indexes that remain the weakest links. However, we have yet to see either index rally hard off their lows. Given the jobs report tomorrow anything can happen. Too bad for the market bulls Friday’s can’t be more like Tuesdays! Have a great weekend.
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