What a difference one day makes. Yesterday’s action was definitely something to be concerned with, but after today’s massive move on big volume is quite telling. Bonds did not play along as yields remained steady. The excitement was certainly with stocks and we are not going to argue with a trend. Perhaps the only blemish on today’s stellar action was how the Russell 2000 lagged the broader market. Even more impressive was the after-hours session where AMZN, GOOGL, and MSFT blew the doors off their earnings. We should see their after-hours move spill over to Friday’s session. Odds are now we are going to continue this trend and could certainly hit new all-time highs.
There was some talk across the twitterverse we may see an island reversal tomorrow. We do not engage in this guess work. Like any prediction there is a possibility this may occur, but we know how guesses tend to work out for the masses. Today’s session broke a significant downtrend beginning this summer prior to the August decline. The move today with volume was a strong indication this was not a one day wonder. Sure, we may hit some short-term overbought conditions. However, this is not a reason to simply give up on the possibility we hit new highs heading into the year-end.
Earnings could still impact this market with AAPL reporting next week. FB reports the week after. The only other catalyst would be next week’s Federal Reserve meeting. Bond yields are not indicating the Fed is about to raise rates. Treasury futures are only indicating a 6% chance of a rate hike. Let’s not forget the same market was predicting a rate hike was set to come in September. All we can see at the moment is a market looking for continue to push higher. There is no other information other than where we are in the current trend.
A feather in this uptrend’s cap is sentiment. The NAAIM exposure index was DOWN week-over-week. Long exposure only at 35% is dreadfully low and well below where we would expect it with the kind of rally we have had. AAII survey is more in line where it has been in recent uptrend. Neutral respondents lead the survey with more than 40%. Bears drop to the mid-20s and Bulls round it out in the mid-30s. The lack of support this market has is a positive for this market to continue higher.
Keep with program. Control risk through position sizing and exits. Do not ignore long signals in fear of losing. You miss all the shots you do not take. Have a great weekend!
