Another day of accumulation, but the market wasn’t ready to IBD’s definition of a follow-through day. The big story of the day was Iran announcing it was able to enrich uranium. Stocks initially sold off on the news as volume was lighter than Wednesday. Once again selling dried up and stocks began to stage a strong rebound. The market, however, was unable to find the strength to notch a prototypical follow-through day. We had plenty of strong stocks move higher with volume indicating strength and we’ll continue to monitor for these stocks to offer up a buy point we’ll go long regardless if today technically wasn’t a follow-through day in IBD’s eyes.
The AAII survey of bulls and bears was released showing investors were more bullish. However, the level of bears remind elevated showing there is still a level of doubt amongst the crowd. This doubt carried over into the options market as the put/call ratio hit a high of 1.01 on the day. The intraday rally was able to thwart put buyers as the ratio closed the day at .84. It is interesting to note the level of bearishness the market has when the market sells off, even on light volume.
We continue to see many traders offer up their view or what we like to call opinions on the market. Speaking to a trader friend this evening he noted how vicious these opinions are being expressed. You either have to be a bear or a bull or not dare to change your view. This to us is hogwash and all that matters to us is whether or not we are on the RIGHT side of the market. If we are in a downtrend, then we find our short setups. During uptrends we are going long stocks who demonstrate the strongest characteristics. Ignore those who say they are one or another as they tend to be wrong a lot and right only once.
Tomorrow we get retail sales and confidence numbers in the morning. This week has been light on the economic news front. It appears every economic number being released is heavily watched and scrutinized. Many fret over whether or not the number misses or exceeds the estimates put forth by “economists.” It is interesting to see folks concerned over how “good” these numbers may or may not be. While we do see these hit the tape it simply doesn’t factor a great deal into our trading. It is more noise to us than anything else. Regardless of how good tomorrow’s retail numbers are the market will dictate how we move forward.
Enjoy the upcoming long weekend and make sure you cut your losses and ride your winners!
