What Bullishness?

End of Day Analysis:

Stocks closed higher in a quiet, holiday-week session. Most big money managers are on vacation, so don’t expect a lot of meaningful trade this week. But the low volume leaves us vulnerable to volatility as smaller traders exert more influence over the market.

Paradoxically, the higher the market goes, the more nervous traders get. In AAII’s latest bulls/bears survey, bullishness actually decreased 9%, hitting 5-week lows all while the index kept setting record high after record high. We see a similar phenomena in the Stocktwits’ SPY sentiment gauge that is still more bearish than bullish. Don’t let anyone fool you into believing this market is overly bullish simply because we are at all-time highs.

Almost every day in September and October ended with above average volume. That tells us there was a whole lot of selling going on. All of it at lower levels from these record highs; some of it at much lower levels. These recent sellers are falling victim of regret while they watch the market march higher without them. Pressure is mounting to jump back in as the fear of a market collapse is quickly giving way to fear of being left behind. Expect the market to continue higher as these regretful sellers continue chasing the market higher into year-end.

Jani