A solid day of gains for the market as Small Cap stocks lead the entire market higher during Wednesday’s session. Lagging behind was the Dow Jones Industrial average as it was only able to sneak out a 6 point gain. Volume was mixed on the exchanges with NYSE volume running higher while NASDAQ volume lagged behind Tuesday’s level. It was nice to see the Russell 2000 lead. IWM regained its 200 day moving average with volume coming in higher than Tuesday, but below its 50-day average volume. A good sign nonetheless and something we need to see continue as earning season rolls on. We could very well see Thursday’s action erase all the gains we saw on Wednesday. For now, it was a positive to see the market rebound with small cap stocks leading the charge.
Bulls once again took the reigns in the AAII Sentiment Survey ending yesterday. We saw bulls jump to 40% while Bears dropped off a cliff to 20%. Those who are Neutral still remain quite high near 40%. It really isn’t a surprise we see the number of bulls up around this level as the market has continued to shrug off fears of a slowing economy. Even an inverted yield curve has not slowed this market down just yet. Perhaps we will see this market test those December lows this year, but it would simply be a guess. We cannot trade on a hunch. The Gambler’s Mentality is not something we endorse. If you trade without a plan and with “knowledge” of where the market is heading next you are likely have a Gambler’s Mentality. Trade on price and manage your risk through position size and exits. Ride your winners. This is not new nor something we invented, but is the formula to great success in the markets. Use it.
We will see if the level of bulls will be a signal this market will see weakness over the coming weeks. Will we see selling? We do not know and nor do we care. Our focus will remain on signals and managing risk. If we are to fall we will have our exits in place!
