Once again morning losses were supported and buy the dip continues to be in favor. Small Caps were not as lucky as the large cap indexes as the Russell 2000 closed lower by 40 basis points. Volume ended mixed as NYSE volume fell as the volume on the NASDAQ rose day over day. This pattern where morning gains are quickly erased only to be recovered by early afternoon continues. There are plenty of stocks continue to act well and we continue getting new long triggers. This typically is a very bullish sign for the market. At this point we are simply executing our strategy and ignoring the noise spewing from the financial media. This market has a bullish tint and we are simply going along with the market.
An interesting development in sentiment week over week. AAII and NAAIM diverged from one another. NAAIM ended the week at 86% long exposure. We are certainly long this market, but only because the trend is our favor. AAII on the other hand is telling a much different story. What the interesting part is how many respondent were neutral. 47% of respondents were nuetral while only 28% were bullish. 24% were bearish. Not a typical response from a sentiment survey where many rush to being neutral. Precisely why simply having a trend following process with a robust risk management stategy elminates the need to be bullish or bearish.
If one were only looking at the Dow Jones Transportation index you would certainly think the market was not about to hit new highs. Whether or not crude oil has hit a bottom transportation stocks are not faring well as of late. Airline stocks were a hot trade for much of 2014 and they have not continued the strength. Keep an eye on SAVE as it was one leader within the group. Other stocks like AAL and UAL were winners last year fighting to hang on. It will be interesting to see how both crude oil and transportation stocks react to one another as we move forward.
Energy stocks are looking much better coming off the lows. Whether or not the return to new highs or if crude stabilizes around $50-55 remains to be seen. While it would be great to “call” the bottom here we will bypass the need and work our process. If we find energy stocks throwing off buy signals we will get long them. No need to be a hero or force any trades simply to be a hero. Stick with the gameplan.
So far a good week with Friday’s session to go. It will be nice to see small caps make a comeback tomorrow and lead gains.
Go out and have a great weekend.
