Led by small cap stocks (IWM) the market reversed early morning losses to close the day with gains. While the reversal was nice to see volume fell suggesting institutions were not in a rush to jump back into stocks. A positive sign was certainly seeing IWM lead the market higher, but we are still waiting for the group to really show some outperformance. The yield curve remains inverted suggesting we do have a recession on the horizon. Not a bad performance by the market but given seasonality we really need to see positive momentum. Will we finally get a trade deal between the United States and China? Futures are higher heading into Thursday’s trading session. We are prepared for whatever the market wants to give us regardless of what it is.
The weakness we have seen from the market hasn’t not deterred Bulls. Bears on the II survey ended the week at 19%. II is typically bullish and again bears simply do not exist on that survey! It would take a move like we saw in December to get the II survey to turn bearish. AAII ended the week bearish, but we wouldn’t categorize it as extreme. 42.2% of respondents were bearish up 2.5 percentage points week-over-week. Bulls ended the week at 26.1% down a half of a percent and those who were neutral went down 2 percentage points to 31.7%. The crowd is bearish, but not to a point where it would indicate an inflection point. We will need to see price to pick up positive momentum here regardless.
Commentary will be a little shorter than normal today. We need a bit more from this market. It would be great for more consolidation and then confirmation. We will see what we get the rest of this week heading into a long weekend.
