Daily update 10/26 NAAIM sentiment survey

Odd day.

The COMPX was slightly positive while SPX and the Dow were slightly negative.  At the same time the breadth was -61%.  Strength in big caps held the market up today.  I sure heard a lot of talk about SPX's big break out Friday.  Some people were out upping their year end targets.  Optimism is no longer in short supply.  New highs dropped way down to 65 while new lows came in slightly lower at 50.  Not exactly bullish acting internals.

The range in the futures really contracted.  It makes sense that buyers stepped back with how overbought they are.  The question is will the bears try to take advantage or not.

The 10 DMA breadth lines are getting rather close together.  The breadth thrust has waned considerably.  Will it get another shot in the arm or a negative cross first?  We should know soon.

The green count is barely above 50 now.  Neither the green count or the breadth is particularly strong.  It would not be all that difficult for this market to roll over.  That will happen without another bullish thrust up soon.

At the Oct. low SPX did not quite get all the way down to the Aug. low.  There was no fear in the air as people were just waiting for that retest to pile in.  However, the people that piled in were not the active money managers.  Here is a look at the latest NAAIM survey.

The latest reading of 35 was actually lower then the week before.  We can also see a big difference from how this survey behaved at the Oct. 2014 low.  It shot up over 60 in no time as the big boys piled back in after the Ebola scare was over.  They are clearly much more cautious this time.  That makes me wonder who exactly was piling in on this rally.  Getting over 60 does not necessarily mean the worst is over, but it historically greatly increases the odds a low is in.  We are not even close to that and it seems unlikely they will pile in at these extended prices without good fundamental news.  That has been in short supply on this bounce.  It has all come on bad economic data.  The worse the data the bigger the rally.  At some point you have to wonder if that is a particularly good investment strategy.

We have a FED meeting on Wed.  I don't know if the market will be on hold until after the announcement or not, but it could.  The next important event will be another thrust day to new rally highs confirming a break above the 200 DMA or a close back below that MA.  Everything else is just noise.

Bob