After a bout of selling this morning the stock market was able to rebound. During the morning’s selling the VIX really did not jump as if there was a ton of fear in the market. We do have a jobs report tomorrow, but was it anticipation of Yom Kippur ushering in buyers? Whether or not Yom Kippur buyers was the reason we do know there was buying interest at today’s low. It also helps from a short-term perspective the market is really oversold. Tomorrow’s job report should provide fireworks. However, it will be how the market reacts is what we will be paying attention to. One day does not make a trend and this stock market will need to do more to prove itself.
Last night IBD put their market outlook as “market in correction.” If we did not have quantitative easing program and zero interest rates it would likely be the right call. At this point, it still could be the right call. Unfortunately, IBD’s market calls have been incorrect and when they move to correction mode it has been a signal to buy. Distribution days have piled on, but they are not what they used to be. Since 2009 we have seen the market shrug off more than 6 distribution days. It has been tough sledding for IBD as of late with their market calls. We at Big Wave Trading have evolved and rely much more than just distribution days.
A positive for the market today was the move from the Russell 2000. IWM was nearly up 1% while other indexes closed near flat. We are not surprised as IWM has been oversold and lead the market lower since the summer. Tomorrow will be a big test for the market as we will look to hold today’s low and surpass Wednesday’s high. The intraday moves will be interesting to watch after we see the September jobs report.
Sentiment did come back in as bulls have fled. AAII Bulls came in at 35% while Bears jumped up to 30%. Once again Bulls did come in higher, but below the 40 level. Even after the most recent decline we typically see AAII Bears come to life. We have yet to see Bears take over. NAAIM Exposure index did drop to 41% as bullish bets decreased. When the index drops below 40% there is a positive expectancy over the next few weeks. The only problem with the sample size is that it comes from mainly the rally post 2009 low. With that said, we are nearing levels where it is logical for the market to rally.
If we did bottom today our scans will begin to show emerging leaders. Make sure you get aboard and ride with Big Wave Trading.
