When I posted the NAAIM (National Association of Active Investment Managers) Exposure Index this week, I thought to myself, "What's wrong with this picture?". To clarify, rather than stay fully invested all the time, NAAIM members adjust their exposure based upon their assessment of market conditions, and exposure can be anywhere from +200% to -200%. Although, the Exposure Index has never been anywhere close to those extremes, it does, however, give a good reading of sentiment among this group of professionals.
I had this article in the queue yesterday with the headline "S&P 600 Nearing Important Support". Well, it turned out to be a bounce off that support today. Small-caps have been hit hard while most large-cap indexes spent the last month consolidating and moving slightly lower. You could say $SML had a correction over the last month.
Since November 9th, the DP Scoreboards have been quiet. It isn't surprising to see the weakness on these Scoreboards to be short-term momentum given the recent decline. The SPY/SPX have now dropped below rising trend channels, but support remains. With DP indicators looking bearish, we could be in for more downside in both the short and intermediate terms.
As part of the MarketWatchers LIVE show (airs M-F, 12p-1:30p - You'll find today's recording under the "Webinars" tab), Tom Bowley and I come up with set-ups on Monday. We call the segment "Monday Set-Ups". This segment has an eye toward very short-term investments as Tom and I compete to see who had the best returns on the following Monday. I use my PMO Scan exclusively to come up with my Monday Set-Ups (you'll find the article with the scan language here). I thought today's set up was very promising for the short term, but also in the intermediate term, so I thought I would share this "angel" that hopefully won't turn into a "devil".
I should probably watch less business news, but I only have it on to catch any big news developments, and the sound is usually off. Nevertheless, I can't avoid some stuff that I'd rather filter out. For example, there was talk on Thursday and Friday about whether investors should be "buying the dip." To clarify, the distance from Tuesday's intraday all-time high to Thursday's intraday low was -1.2%. The distance from Wednesday's all-time closing high to Thursday's close was -0.4%. In my experience, that ain't a dip, but the discussion shows how rose-colored the crowd's view has become.
Today's decline was enough to push the OEX and Dow PMO BUY signals off the DP Scoreboards. The NDX is still looking good with the PMO actually rising right now. However, if the other indexes continue to decline, it is very likely the NDX will follow suit. Gold received a new PMO BUY signal while price easily holds support.
As noted, a new technical alert arrived in my email inbox this afternoon. I was surprised that I didn't receive word of any DP Scoreboard PMO signal changes, but seeing TLT grab an ITTM BUY signal wasn't surprising. I think TLT is at an interesting "decision point" right now. Here's a look at the daily, weekly and monthly charts.
Yes, the PMO BUY signal on the SPX has already disappeared. Unfortunately with the margin so thin between the PMO and its signal line (thousandths of a point), this likely will change again tomorrow if the SPX can close higher. What is interesting...the SPY never managed a PMO BUY Signal and it has now topped below its signal line.
It's official! All four DecisionPoint Scoreboards are on BUY signals in all three timeframes on the PMO and Trend Models. Tom Bowley and I continue to discuss during the MarketWatchers LIVE show about the hurricane force bull market winds. If these Scoreboards don't convince you, I'm not sure what will. Bull market rules definitely apply right now. What does that mean? Simply put, don't worry so much about overbought conditions and expect bullish conclusions to chart patterns and support/resistance levels. This is NOT to say that we have an unending bull market or are not vulnerable to a price shock. It simply tells you the temperature of the market is extremely bullish, so why buck the trend?
Of my comment, "Not out of the woods yet," you might ask, "What woods?" The market, after all, did manage to grind higher this week, so what's the problem? The problem that I see is a persistent weakness in our intermediate-term indicators, but we will get into that later. More immediately, we note that this week higher prices were accompanied by much higher than average S&P 500 volume. This could be a sign of distribution.