A quiet day for stocks as NYSE and NASDAQ volume fell. Small Cap stocks led the market decline, but losses were contained. Given the move since October a little pause is not out of the question for this market. We will be on the look out for any cracks in the foundation with distribution and leading stocks faltering. So far, we are holding up. A quick correction would not be out of the question and many will certainly be calling for the next big decline. We will stick with what really matters. As we saw Thursday the market is still fixated on any headline regarding US and China’s Trade deal. Until the ink is dry expect the market to continue to react to any and all headlines. Stay the course and always maintain discipline with your risk management process. The market is not going to do you any favors.
Sentiment has pulled back from its bullishness this week with the number of AAII Bulls under 40%. This week we saw the number of bulls drop 6.5 points to 34.2%. Neutral respondents gained 2.3 points to 36.7% while Bears inched up 4.2 points to 29.0%. Not at all surprised to see bullishness fade, but we really have not witnessed any sort of decline. Active managers were pulling back on exposure as the market pushed higher. NAAIM Exposure Index did increase a bit this week, but nothing notable. Extreme levels of sentiment have yet to exist. Perhaps at some point bulls or bears will get into extreme territory, but unlikely given what we have seen.
What this market will do next is anyone’s guess. Any hint of selling and you have Twitter Gurus calling for the next great decline. They could be right, but they really have no clue what this Stock Market will do next. Neither do we, but the key difference is we focus in on what the market has done not what it will do. The market will drop clues about its trend whether strong or weakening. Distribution and faltering leadership is a solid indicator the market is on shaky ground. Currently, we simply do not have this indication of a weak market. Could this change? Yes, most certainly it can and will likely change at some point. We just don’t know when and it could be months or years away. Stick with Big Wave Trading as we help you ignore the noise.
We hope you have a great weekend and best of luck to your trading today!
