Its senses, maybe? Nah, probably not.
But bear biases aside what is price action saying? After all what we, or anyone, think the market should be priced at is irrelevant. Price is truth.
The bears were mostly able to hold their ground today, with minor to mild declines across most indices. One small, and surprising exception to this came in the form of the small cap RUT index (Russell 2000). We have been somewhat badmouthing the RUT for awhile now for its poor performance relative to other indices but it isn't terribly surprising that she outperformed to correct some of that divergence today. The question is can it be followed up by a stronger performance? If we don't see more capital inflow to the small caps and high beta issues soon this rally will stagnate, or even falter.
And back below the 2011 highs we go. It's to be expected that we would flirt with this level for awhile but bulls probably would have liked to at least see a successful bounce off that 1370ish area, acting as support. Though we still have not had even a single 1%+ down day yet this year in the SPX, with today being about a 5 point loss for -0.39%. However, MACD weakened further and relative strength slowed its advance against the small caps. It's a mixed bag at this point instead of the all positives of weeks past but it could still go either way. Tomorrow should provide more clarity we think. The outperformance in the RUT can clearly be seen in the relative strength readings of both the RUT/COMP above, and the SPX/RUT below.
We want to very briefly touch on volatility measures. In our weekly report published Sunday we mentioned our view that the VIX has been forming a bottom and could be setting up for one of its classic spikes. Today the VIX made a move upward of +0.76, to 18.05 for a 4.4% gain on the day. It was, however, up over 7% at some points in the day. We think buying volatility as a hedge may be a good play right now if you are still heavily invested in the market
That's it for today! See you next time and stay safe (and lucky) out there!
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