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T3s Take 3: Bulls Squeeze Out Another Victory Ahead of Earnings Season

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1) Shake and Bake

Stocks looked set to put in a down day in the early going, with the SPX dipping slightly to 2441.69.

But the bulls stepped in to buy the tiny dip to get the index in the green by the close, with the SPX closing up 0.2% 2447.83

However, the range was extremely tight today, reminiscent of the boring Spring action.

Meanwhile, the VIX fell under 10 since June 29.

Biotechnology got a nice boost in the afternoon after the Independent Payment Advisory Board said that the Medicare Trust Fund will be solvent until 2029, which means cost cuts will not be triggered.

The Nasdaq Biotech ETF (IBB) rose +0.8%, which seemed to give the market some stability late in the day.

Energy was strong today on better-than-expected trade data, which also boosted Asian markets.

Retailers impressed after Target (TGT) reported impressive earnings results and impressive guidance.

FOMC Chair Janet Yellen appeared in front of a Senate panel today, and said the US economy is unlikely to reach President Trump’s 3% annual growth target.

And speaking of the President, steel stocks jumped this afternoon after President Trump said he is considering using quotes and tariffs to block foreign companies from dumping steel in the US.

Banks were also solid ahead of earnings from JP Morgan (JPM) and Wells Fargo (WFC) tomorrow, even though the rest of the market was mostly asleep.

2) Hanging in There

This morning, T3 Live Chief Strategic Officer Scott Redler, issued the following commentary on SPX:

The descending trend line was taken out with force when we cleared the SPX 2435 area. That’s our new pivot to trade against. Holding that gap keeps momentum bulls in control for a move back to the 2453 all-time high. Yesterday’s high is 2445. 

SPX opened above the 2435 area and broke yesterday’s high.

So we may still be in the game to make new all-time highs, possibly even tomorrow if the banks put up good numbers.

Aside from the banks, I’d keep an eye on the aforementioned biotech sector, which seems to be providing leadership as the Nasdaq rocks back and forth.

3) A Quick Sentiment Look

I keep hearing that investors are complacent and I still don’t see much evidence of it.

The American Association of Individual Investors just released its latest weekly sentiment survey.

According to AAII, as of yesterday, just 28.2% of surved investors are bullish.

This is down -1.3% from last week, and well below the long-term average of 38.5%.

70% of respondents said the market was better than expected. But they still won’t budge – they’re still doubting.

In fact, despite the market’s stunning resilience since the election, the average bullish reading is just 33.3%.

Since so many traders make comparisons to 2007, let’s take a look at the averages back then.

From the start of 2007 to July 12, 2007, the average was 41.6%.

Plus, we can go back to a recent Gallup poll, which reported that just 54% of US adults have owned stocks during the 2009-2017 bull market.

From 2001 – 2008, 62% of adults owned stocks.

In fact, the only group of Americans that have maintained stock ownership has been those earning over $100,000 per year.

Everyone else is leaving! So what does THAT say about sentiment?

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