We kicked off the morning with a disappointing GDP release as first quarter the economy contracted by 1% rather than the -.5% expected. Initially, the Stock Market experienced some selling pressure as traders were looking for something to sell. Just after 10 amEDT buyers began to overpower sellers and take over for the rest of the session. Volume was nothing short of pathetic, but it has been a theme. We would simply like to see volume expand on days like this rather than contracting. In an ideal world we’d see this, but we are in a quantitative easing world and nothing is as it seems. This market is in an uptrend and there is no sense in fighting the current trend until our signals begin to tell us otherwise.
Sentiment is one thing that is not screaming this is an absolute top. Earlier this year these indicators we follow were certainly near frothy levels. Since then, they have certainly come in a bit and have been far from the same levels back in January and February. AAII survey did move towards the bull camp this week with 36% of respondents saying they see the market higher over the next 6 months. Bears dropped to 23% while those who are neutral continue to dominate the survey. II continues to be super bullish with 58% of the respondents are bullish. Just 17% say they are bearish. NAAIM Exposure index sits at 72% with a 200% bullish bet. Bearish bet stayed at -125%. While the II survey remains at lofty levels what we see from the other surveys is simple they are not confident in the market going in either direction.
Our current BWT Ratio of the three major ETFs: SPY, QQQ, and IWM have ticked lower suggesting any downside risk has diminished over the near term. IWM was at the most risk, but after the price and volume action this week it has been able to move towards a neutral reading. This ratio is far from perfect and nor is a timing indicator. It simply allows us to identify the likelihood of a possible decline in the market. Here is the current picture:
Perhaps we are seeing the beginnings of summer volume creep into the market already. It is already dreadfully light and if this is any indication of how summer will go it will frustrate a great number of people.
Have a great weekend and we’ll see you here Monday.
