This morning’s economic data helped boost the market, but it couldn’t keep the market afloat for the entire day. Major distribution struck down on the entire market as sellers simply overwhelmed the market. So much so today’s outside reversal has ended our current uptrend and pushed us into neutral model. There are other signs this market may be headed towards a full on market sell mode for our model. There are some leaders holding up and if they let go it will be a signal to us to get out of our longs and look for more downside. We can take advantage of whatever the market gives us and we’ll do just that. As we move forward we’ll be adding to hedges and shedding stocks giving exit signals. Our uptrend is over and we are executing our strategy to take advantage of the price action.
We are still in a quantitative easing environment and that has meant every dip will be bought. Just like at the beginning of February many believed we were toast and we were able to push higher. Remember all the comparisons to 1929? Even the 1987 crash has been thrown out recently. Without a plan what good does it do you to “predict” a crash? What if there is or isn’t one; do you have a system robust enough to withstand and take advantage of any situation? Many simply do not have a plan in place and use their opinions to manage their portfolios. If there is a crash headed our way we’ll be prepared to get on board.
Sentiment remains in the bull camp with AAII, II, and NAAIM exposure index are slanted towards bulls. Investors Intelligence survey showed bears remain under 20% and bears have been for quite some time. AAII is a different story as it has a lot more volatility to it than II. Bulls remain above 40% and bears under 30%. NAAIM Exposure Index continues to show managers reporting to NAAIM are bullish and continue to be bullish. Perhaps this week’s decline will embolden the bear camp. Truth be told sentiment will likely be wrong once again.
We’ll wrap up the trading week tomorrow and it will be the last Friday before the next Federal Reserve meeting. It’ll certainly be an interesting week with Yellen’s first Fed meeting. Get out and enjoy the weekend and we’ll be back Monday.
