Once again the market gapped to the upside only to see prices head lower. Volume ran lower throughout the day; it never got going despite the acceleration in selling at the 2pm hour. Today’s action was a culmanation of the entire week. While on the surface it apears the market is consolidating gains we do have a few stall days and the action has been quite loose. It was nice to see the market have the ability to get off the lows and avoid finishing down there.
The story of the day is the US Dollar index finishing at the lows of the session. Despite the looming government shut down, the continued printing of the US Dollar has brought the trade weighted index at multiple year lows. The unknown consequences (heavy sarcasm) of inflation and potential hyper-inflation will continue to punish the dollar index.
Another red flag is the ultra-bullish nature of the entire market. Investors Intelligence survey hit a multi-year high of 57.3% while bears are just 15.7%. AAII Bulls stand at 43.59% and Bears at 28.85, but AAII bulls hit a high just before the Japanese crisis. Remember, sentiment is not a perfect indicator and should not be traded on, but the ultra-bullish nature should have you cautious.
This market could still move higher from here, but it is giving hints the 2 year long bull market could be on its last legs. Keep a tight leash on your positions.
