The slide continues for European stocks as the standoff over the Ukraine conflict. At the US market open US stocks shrugged off European weakness. Volume wasn’t overwhelming on the upside as we pushed higher. Just before 11am EDT was when sellers began to hit the market and push stocks lower. Our market model remains in sell mode and it has paid off following our process. Price action continues to favor the downside despite what we see from some oscillators. At this point we’ll need to see a high volume reversal from the lows to trigger interest on the long side. For now, we will heed our process while this market continues to push lower.
Turning our attention to Europe the indexes on the continent continue to look dire. Any rally has been sold and when selling is uncontested prices can lose steam quickly. Blame will likely be placed on Putin and his actions with Ukraine. However, it may be a few days or weeks before we get the actual reason why selling has taken place. Until then why argue with the price action in front of us? There is no reason. Check out Spain, Italy, and Germany. Not the picture of health by any stretch.
There was an uptick in the number of bears this week in the AAII survey. 38% of the AAII respondents were bearish with 31% were bullish. Not an extreme, but after this week’s selling it would not be surprising to see the number of bears jump well over 40%. NAAIM exposure index dropped to 50% long after spending above 80% since June. Given the oversold nature of the market and sentiment turning bearish we could very well see this market bounce. Whether or not it is of the dead cat variety remains to be seen. Sentiment has turned to the bear side, but it is far from extreme.
One thing to keep in mind is continue to find the market leaders who can emerge when this market does turn. When that will happen is anyone’s guess. This doesn’t mean you give up on finding potential leaders. We have our eyes on plenty of them. SCTY and TSLA are two stocks we have identified as leaders. For others you need to subscribe! Elon Musk is doing well in light of the current market environment.
Geopolitical issues remain in Iraq and Ukraine. These issues continue to weigh on the minds of investors and traders a like. From our point of view it is all noise. Our trading process ignores the noise and focuses on price action. Have a great weekend.
