This morning’s economic data was not too impressive, but it would be afternoon headlines dominating the market chatter. Crude oil made a push higher putting pressure on the Dow Transportation stocks. The move in Crude was credited to the conflicts arising in Iraq and an excuse for market pundits for the move in the stock market today. Volume was up across the board and when we couple it with price action we get a day of distribution. It is the second day of distribution for the S&P 500 and the first for the NASDAQ. We certainly are a distance from the mean, but one day does not make a trend. It takes more than a few days to change a trend, but for now we’ll wait to see if this gets any downside follow-through.
Many are blaming Iraq as the catalyst for this market to push lower. Remember the Ukraine situation? Weren’t we supposed to enter into a correction? We didn’t and while the Iraqi situation may worsen it is likely our markets will shrug off the news. Of course we aren’t blind and given the market is stretched a bit far from its mean we’ll enter a hedge. (Members click here for Non-members sign up here) If this does turn into a new downtrend we’ll adhere to our trading strategy and follow price. Our opinion of where this market may go simply does not matter. We or you cannot predict the future.
Sentiment remains bullish with the II Bulls remaining above 60% and II bears below 20%. The II survey has been in this mode for quite some time. On the other side has been AAII where this survey has been more neutral. This week AAII bulls jumped to 44% while bears just under 22%. NAAIM exposure index slid from 90% to 87%. There is nothing jumping out screaming we are at any extreme from a sentiment stand point. However, given we are 5 years into a bull market perhaps survey respondents are simply tired of guessing.
There is a good chance we could still move lower here. It is truly anyone’s guess. The important piece to the puzzle is following a sound trading process. Go out and have a great weekend.
