After two days of sizeable gains the market just did not have enough steam to continue the march higher. ADP employment report was lower than expected, but on the positive side Factory Orders and ISM Services were better than expected. Despite the better than expected reports the market simply could not find enough demand to continue the nice run Tuesday and Wednesday brought to us. Volume was down, but ahead of the jobs figure it is not a big surprise the big boys were on the sidelines. There are certainly positive tints to this market and while we remain cautious this market appears poised to push higher.
Appearances can certainly be deceiving and why we simply cannot obey our opinions. Price action will rule the day and while we may think things look good the situation can change on us. This is why we need sound rules and discipline following these rules when it comes to our process. Simply flying by the seat of our pants will leave us open for the market to gut our capital. It is important to have a sound trading process and following it to a T. Your account will thank you in the long-term.
Sentiment has not changed very much and from the AAII survey remains bullish. Even with the drawdown from August bears simply haven’t overpowered the bulls. AAII survey showed 35.5% were Bullish while 31% were bearish even after the Syria nonsense. Given the decline last week it would have been typical to see bears inch above 35%. NAAIM survey certainly isn’t overly bullish, but hasn’t been bearish at all. Bearish bets haven’t been added, but bullish bets have been paired back. No big surprise there. Sentiment is leaning towards bullishness, but once again not hinting at extremes.
Market pundits will put a lot of weight on tomorrow’s payroll figure. Remember, no one can predict how the market will react after the release. Anything can happen. Would a blow out number really have the Fed taper at the next meeting in less than two weeks (9/18)? Even if you could guess would you be able to nail how the market will react? While you make get “lucky” a few times, but over the long-term you have a greater chance at failing. Stick with Trend Following and do not get stuck gambling.
