This short week began with a bullish investor sentiment, gauged by the American Association of Individual Investors (AAll), fewer than 20% reading (only in eight instances since 1990). It’s truly a remarkable level, nearly matched by persistent high readings of neutral-this signals the kind of indifference that can make swings in the market even more exaggerated.
AAII Sentiment Reading |
Change |
Percent |
Bullish |
-8.3 |
19.2% |
Neutral |
-5.7 |
32.1% |
Bearish |
+14 |
48.7% |
The lack of bullishness is actually great news for the market in the sense that it’s almost a perfect contrarian indicator. However, this market has its work cut out by trying to break out between now and the next jobs report. Meanwhile, there are certain sectors and individual names so oversold they could put in major rallies that are still in the downtrend; there are a few on the cusp of breaking through pivotal resistance points.
Case in point, consumer discretionary names were strong, led by Wynn Resorts (WYNN), Signet Jewelers (SIG), and now the SPDR Select Sector Fund (XLY), which is on the verge of breaking through the top of its down channel. Consumer discretionary is still down more than 10% for the year, which continues to boggle the mind to the degree that big trends should be working for the names in this sector.
Tuesday was the session I was hoping for coming in from a long three-day weekend. Stocks rallied, in part to news from the oil patch, but it held when crude turned lower. Moreover, the midday swoon from news that the Fed is seriously thinking about breaking up the banks is equally impressive.
As I mentioned, the best performing S&P sector was consumer discretion with several Wall Street Strategies names leading the way.
Wynn Resorts Ltd |
0.27% |
69.14 |
+5.37 |
+7.77% |
Staples Inc |
0.26% |
8.32 |
+0.53 |
+6.37% |
Signet Jewelers Ltd |
0.38% |
98.63 |
+5.45 |
+5.53% |
CarmaxInc |
0.43% |
43.63 |
+2.37 |
+5.42% |
TripAdvisor Inc. A |
0.33% |
59.90 |
+3.23 |
+5.39% |
Royal Caribbean Cruises Ltd |
0.57% |
68.77 |
+3.63 |
+5.28% |
The Priceline Group Inc |
2.56% |
1058.01 |
+54.42 |
+5.14% |
Viacom Inc B |
0.55% |
32.81 |
+1.60 |
+4.86% |
Under ArmourInc A |
0.67% |
76.29 |
+3.62 |
+4.75% |
Harman Intl Industries Inc |
0.24% |
70.22 |
+3.33 |
+4.74% |
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Russell 2000
Small caps have been slaughtered over the past year, down nearly 19% after defying gravity and shorts for years. As for the longer-term chart for Consumer Discretionary, there is a strong down channel and pattern of lower highs and lows.
The five-day chart is obviously showing signs of life; look at the 52-week chart, it is clear that big tests of resistance are at 1,050 and 1,100.
On Wednesday, we we’re focusing on housing that has sent mixed signals for the better part of 18 months. I think it’s ready to take off, but we’ll see what housing starts say.
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