Sellers won the day and the surprise was the Dow leading the charge lower. Volume jumped day-over-day in the heaviest volume of the week. Better than expected jobless claims and empire manufacturing were “good” news. On the flip side you had the Homebuilder confidence dip. Was today’s selling in response to the continued efforts by the FOMC to taper down QE to nothing? We won’t know this for some time and it is simply best to continue to short weakness and buy strength. The real question will be if the Dow and S&P 500 follow behind the footsteps of the NASDAQ and Russell 2000. Be vigilant with your positions and ignore the talking heads on CNBC and Bloomberg.
Sentiment remains in the bullish camp and the story essentially has remained the same. The big change really was the number of bulls versus bears on the AAII survey. Bears dropped to 23% while Bulls jumped to 33%. Despite the spread widening between bulls and bears those who are neutral continue to rule the survey. NAAIM managers continue to be bullishly positioned. There weren’t any bearish bets being placed and the index moved from 76% long to 78% long. It’ll be interesting to see if this week changed the positioning of active managers.
Last week’s low still remains intact for all the indexes besides the Russell 2000. The Russell 2000 index set a new low today, but found quite a bit of support. It has been beaten up and dip buyers certainly remain foaming at the mouth to continue to buy any and every dip. Even with today’s bounce the index remains in a downtrend and continues to point to more lows ahead.
The S&P 500 now has reversed hard from its high set on Tuesday. In addition to reversing it has seen back to back days of distribution. While a pullback from highs isn’t that unusual it is unusual to see back to back days of distribution. Knowing your exits is important here and you do not want to outsmart the market. Follow your signals and do not deviate from the plan.
Tomorrow we’ll get a read on housing starts and building permits. Capping off the economic data will be the University of Michigan confidence figure. All of it will be forgotten within a few minutes except for CNBC and Bloomberg ushering in “experts” to sell ad space for their viewers!
Have a great weekend and we’ll see you back here next week. Remember to head over to our register page and check out our deal on our Platinum subscription!
