Today’s market suffered quite a bit of selling and with volume coming in higher on the NASDAQ. The progress made yesterday was completely erased and now puts this market under heavy pressure. NYSE volume was lower, but the S&P 500 lost an important pivot at 2043. It seems the strength in the Yen has caused some concern amongst market participants. Today’s negative action certainly casts a darker shadow over this market. We wanted a pullback and while this will help with any overbought conditions this is not want we really wanted to see. Stick to the process and while this uptrend isn’t over yet we are going to be cautious going forward.
Sentiment hasn’t shifted all that much in the bull camp even after this week’s rally. Remember, sentiment survey’s finish up on Wednesday and would not account for today’s move. Bears were a shade above 21% while Bulls were up to 32% in the AAII survey. NAAIM exposure finally got into the 70s just in time for this volatility. Many managers were underinvested and now will face volatility after jumping in too late. It pays to move with price and not wait for the why or it is too late.
Tops are not completed in less than a week. It will take some time for this market to roll over if it will happen. Just look at last November and December. No one knows how this market will turn out here. We will act with the information we have and right now volatility is increasing. It will be wise to reduce position sizes on any new long as well as tighter exits. If your stock is trading at $20 a share with an ATR of 1. A simple stop at 19 and a target of $23 is a good risk reward setup. Control portfolio risk through your position sizes and exits. There is no need to be a hero.
What a fun market we have here. It may be too early to call it churning, but it is less than an ideal market environment after today’s big losses. Let’s not forget bonds continue to rally pushing yields lower and lower. Stick with the plan and have a great weekend.
