Just as IBD indicates the market is in correction mode we get a bounce in the stock market. Volume was lower across the board as institutions were not all that giddy piling into stocks. IWM saw positive price action clearing yesterday’s high. On the negative side many leaders had light volume moves today suggesting the enthusiasm for this market to push higher is very light. We still have oversold conditions where any sort of bounce is not out of the question. Tomorrow’s jobs report may provide a boost this market needs to shake off the recent selling.
The same story continues to play out with regards to sentiment reading. II readings continue to favor bulls with bulls registering at 52.5%. Bears remain in hibernation with only 13.9% of II survey are bearish. AAII survey remains in neutral territory. Bulls and bears are about even this week. NAAIM exposure index remained above 80% meaning the average manager is 80% long equities. Even with the current slide in stocks active managers are maintaining long exposure. We think this is quite fitting for a market fueled by extremely low interest rates and hung over from the Federal Reserve’s quantitative easing program. The individual investor simply is not interested and the active managers are not going to get behind the eight ball and miss out on a rally.
Tomorrow’s job report will sure be the topic of discussion amongst market pundits. It should provide the market with some fireworks to at least start the day. Last month’s release we had the Good Friday holiday and were unable to see how the market would react. We will certainly see how the market reacts to the release.
Still a troubling sign continues to be the high yield market as measured by HYG. Late in 2014 HYG rolled over and while the market did not collapse we did see the market go through some tough sledding. Keep an eye on HYG, TLT, and XLU as you will get an idea where the market believes the Fed will go with rates.
Another week is about to be closed and we have had one heck of a week. Stick with the process and cut those losses short.
