Today was a roller coaster ride for stocks as the NASDAQ and Russell 2000 head in the opposite direction of the Dow Jones Industrial Average. At the onset stocks opened lower, but quickly found a bid and continued to stay in positive territory until the 30 year Treasury Auction. The auction did not go so well with sellers using it as an excuse to slam the markets lower. Given the weakness in the NASDAQ and Russell 2000 they continued the pattern while the Dow was able to stay in positive territory. Volume was lighter than yesterday despite the roll over intraday. The big swing in the NASDAQ is certainly concerning because the index continues to show it cannot hold higher prices. The positive side of things is the NASDAQ was able to hold yesterday’s big volume a low. A breach of the low would certainly usher in further downward pressure on prices. This market continues to hang on by a thread and it is clear where the weakness is.
Sentiment continues to be in favor of the bulls with the exception of the AAII survey. NAAIM exposure index dropped from 80% to 76% week over week. Bearish best actually were less, but it was bullish bets being reigned in. II continues to remain bullish, but the main story continues to be those who remain neutral in the AAII survey. Staying away from this chop certainly has been the right place to be. It’ll be interesting to see how we continue to progress from here. Professionals still appear to be bullish given the II survey and NAAIM exposure index.
The clear winners of the market other than the ones staying away are the stocks in the Dow Jones Industrial Average. Again, the flight to safety trade has been going strong for the entire year. Blue chips are nipping at all-time highs while the NASDAQ and Russell 2000 look like they want to head lower, much lower. There have been two other times when the Russell 2000 was below its 200 day moving average and the Dow was at or near new highs. Those were 1999 and 2007. It is clear small caps and the NASDAQ are signaling trouble. While we may get another new high or two on the S&P 500 and Dow it doesn’t appear this bull market has much left in the tank.
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Get out and enjoy the weekend. Make sure to do something nice to all the mothers out there in your life.
