We're at a point where nothing seems to matter -- until it does -- and here's why I think we're at 'Enthusiasm' on the Sentiment Cycle.
I know we're in the cycle of the market where nothing matters.
It doesn't matter that the big-cap indexes rise with lagging breadth. It doesn't matter that the number of stocks making new highs is so low while the S&P 500 is knocking on the door of a new all time high. I mean, 59 new highs for the New York Stock Exchange with the S&P a breath away from a new all-time high?
It doesn't matter that the put/call ratios have been so low for so long that I have had to change the scales on the charts, because some have never been this low before. It doesn't matter that the market gets back to an overbought reading next week. It doesn't matter that the Daily Sentiment Index for the Volatility Index got to single digits earlier this week. And it certainly doesn't matter that we're all talking about stock splits, as if they matter.
It doesn't matter that the National Association of Active Investment Managers (NAAIM) has its highest long exposure in years at 102.4. It doesn't matter that the American Association of Individual Investors (AAII) finally decided to throw the towel in, as the bulls gained six points this week at the expense of the bears. Oh sure, the bulls are only at 30, but that's a mighty shift when the S&P is up over 10% since they got so bearish.
It doesn't matter that bond funds -- SPDR Barclays Capital High Yield Bond ETF (JNK) , the iShares iBoxx High Yield Corporate Bond fund (HYG) and now the iShares iBoxx Invest Grade Corporate Bond fund (LQD) -- have gotten a bit shaky in recent days. It doesn't matter that interest rates have had quite a move up in the last week. Yes, it was only a week ago that I suggested that might happen, and now rates are up nearly 15 basis points.
Or, it doesn't matter that the dollar is off the lows. Or that gold and silver have taken a huge hit earlier this week. Nope, nothing matters because even when breadth is poor and they sell the market off, it bends, but it doesn't break.
I don't know what it will take to get some selling, the kind of selling that takes us to a good oversold, the kind of selling that changes sentiment, the kind of selling that resets the charts, but that's really what this market needs now.
So are we at "Returning Confidence" or "Enthusiasm"? I'd put us at Enthusiasm because Returning Confidence seems like that was early June, and "Buy the dip" was late June. But it probably doesn't matter. Until it does.
Reprinted from thestreet, the copyright all reserved by the original author.
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