The FOMC meeting concluded yesterday and they certainly signaled rates will remain steady for the foreseeable future. Stocks cheered the initially after the release of the statement at 2pm EST. However, by the final hour sellers were able to wrestle control and knock the indexes to their mid-point of the session. IWM has been the only major index consolidating, but it too looks a bit vulnerable here was well. It would be nice to see other indexes consolidate and all of them hold key moving averages. In reality, the market will do whatever it wants and we must simply follow the price action. This is precisely why we stress the importance of a trading plan. There is only one way to make sure you stay in this game and this is to make sure your losses are contained. Whatever this market wants to do in the short-term we are going to be ready for whatever it throws at us. Be ready and be prepared.
The lack of leadership from the Russell 2000 is something we are keeping an eye one. Right now, it is a weird situation where the index is consolidating its run up since December. On the flip side, it is lagging the S&P 500 and NASDAQ Composite. It is no secret we would like to see small caps lead the way as it is signaling investors and traders alike are taking on risk. Our current situation shows folks continuing to favor names in the NASDAQ 100. We cannot force the market to do what we want. Simply follow where the market would like to go. Do not fight the trend.
Bulls jumped higher week over week in the AAII sentiment survey. Jumping nearly 5% Bulls ended the survey at 37.3% which is just about the historical average of 38.5%. Bears dropped nearly 8 points to 23.4% and well below its historical average of 30.5%. Those who are neutral rose almost 3% to 39.3% which is well above its 31% historical average. What the AAII survey shows is that more respondents really have no clue or really an opinion of where the market is headed next. Perhaps they are still whiplashed from 2008-2009 or wounded bears who have been perpetually wrong about the direction of this market. It is anyone’s best guess.
We hope you have had a profitable week’s worth of trading up until this point. March Madness begins and we hope you enjoy the weekend!
