What started out as a decent day turned into a mess for small caps and especially for the NASDAQ Composite Index. Momentum stocks were the ones who were rocked hard as it appears institutions are shedding these names for industrial and transportation stocks. For whatever the reason the weakness in the NASDAQ and Russell 2000 is certainly ominous and something we are paying attention to. Volume in the index constituents was higher on the day giving the NASDAQ composite a day of distribution. Tomorrow’s non-farm payroll should create a few fireworks for the open and tomorrow should set the tone how we move forward. We have a very shaky market which may reverse the gains we have seen over the past few sessions.
Our biggest concern is over the previous leading stocks not finding the ability to push higher. We can name a few like FB, SCTY, PCLN, PANW, SPLK, FEYE and more who simply cannot find any love from this market. The strength lies with names from Oil and Gas and Utilities. With crude oil popping over $100 again likely gave this group a boost or simply could be managers running for safety. Utility stocks are certainly a sector known to be a safe haven for when managers are fearful. When you have Oil and Gas, Utilities, and Industrials leading it is somewhat interesting. Follow price and for now momentum type stocks are headed lower and old world sectors are in favor.
Over in sentiment land AAII continues to be in neutral territory. Bulls did jump to 36% while bears hung around 26% of the survey. While Neutral respondents dropped week over week they are still the biggest and showing how the small investor is simply confused. NAAIM active managers remain bullish with a mean exposure of 91%. An interesting note, the bearish bet made was -50% which is the lowest since mid-February. Sentiment is certainly fun to look at, but it is completely unreliable when compared to price. Price pays.
Hard to believe another week is over and tomorrow’s job report should kick up some fireworks. Enjoy!
