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Thursday, October 31, 2013

Daily update 10/31

Lets take a look at the current sentiment situation to start with.  Here is the NAIIM survey first.


The only reading in the last two years was back in Feb. of this year.  That ushered in a period of mostly sideways price movement in SPX.   Needless to say fund managers are nearly all in on the long side.  There have only been a few readings this high in the entire history of the survey which started in 2006.  But wait there is more.  Check out the II survey.


At 16%  the number of bears is at the lowest level in the two years on this chart.  I believe this is the lowest reading in this bull market.  Needless to say there are not many bears left.

What really strikes me at the moment is the number of times I have read or heard there is nothing to worry about before the end of the year.  It is nearly a universal feeling.   The market is clearly loaded up long.  You have to wonder how much hedging there is going on with so many feeling there is nothing to worry about.  Maybe there really is nothing to worry about. 

Today was a battle between the bulls and the bears, but nobody clearly won.  Here is the daily SPX chart.

Volume was relatively heavy today.  This chart is still extended on the upside.  Is it starting a pullback?  Lets zoom in to the SPY 60 minute chart.

SPY bounced off the 50 SMA this morning and rallied up to the 18 SMA.  It then sold off into the close.  However, it ended the day still above yesterday's low and at the 50 SMA again.  The volume pattern clearly shows big red bars dominant now.  If that continues we are headed lower.  The bulls need to get SPY above today's high before claiming victory.  The bears need to break yesterday's low.
The first week of the month tends to be bullish.  However, this market is still really extended.  That may not apply this time.  Nov. is also tax loss selling season and in both 2011 and 2012 we saw a sizable pullback.  With the complacency noted in the sentiment surveys above if SPX gets below 1700 I think a trip to the 200 DMA would be in store before the month is out.


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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.