Stocks enjoyed higher turnover and price gains on Thursday as headlines crossed the wires indicating phase 1 of a trade deal between the United States and China had been completed. We say heavier volume and solid price gains a positive for this market. Financials were a big winner with Banks leading the way. Regional Banks were the big winners as rates inch higher. Overall a solid day for the market. Real Estate and Utilities were the biggest losers on the day. It is no surprise we saw these two sectors lead the market lower with rates moving higher. The search for yield is back with bonds for now. There is not much to argue with regarding the state of the market. We do not know the future, but right now we are in good position to continue to march higher.
Perhaps a blemish on the day were small caps not closing out at the highs of the day. While price gains were decent at the close the group was well off their highs for the session. IWM still is off its all-time high set in August of 2018, but the ETF and group are making progress towards notching new all-time highs. Surprisingly it wasn’t a major index leading the market higher, but mid-cap stocks led the entire market yesterday. It is not often you hear many if anyone talk about mid-cap stocks. They are certainly the forgotten group when talking about slicing the market into market-cap. Most will lean towards the mega-cap or small cap slice. There is always potential somewhere and if you are willing to stay patient you will find opportunity.
Sentiment remains below historical norms. Traders still are chasing tail events as if this market is about to crash to new lows. We have no idea if a stock market crash is on its way or not. Nor do we know if we are going to continue to hit all-time highs. Given the lack of overzealousness from bulls and many who stay on the sidelines (ie extreme cash levels seen in money market accounts) there is no reason this market cannot continue to march higher. AAII Bulls ended the week at 37.63%. Not high at all. NAAIM Exposure index remains sub-80% with exposure at 78.71% this week. Last year’s hiccup did a nice job reinforcing the fears from 2008-09. All we can do is focus in on price and remain vigilant with our risk management process. Everything else does not matter.
We hope you have a tremendous weekend!
