What is next for the stock market after this move? Right now everyone is back asleep and is expecting more stock market gains to come.
Everyone is bullish?
You don’t believe me?
Consider this the Investors Intelligence survey has barely moved at all from where it was at the end of January BEFORE the recent 10% drop in the DOW.
The number of people bearish in this poll released yesterday stands at 14.6% so it hasn’t moved even more than 2% as a result of the drop.
And the thing is that low recording of January was a record low reading that showed a record level of bullishness in this sentiment indicator.
But more importantly it is what people are doing.
After the drop the other week several online brokers reported that small investors actually did more BUYING than selling during the 1,000 down DOW day.
An article from Wealth Management said:
Apex Clearing, a custodian which holds 7.6 million direct-to-consumer accounts, said it saw an 84 percent increase in net buying against the average market day in the robo advisor and self-directed spaces during the first half of last week. In the self-directed space alone, the custodian saw an 88 percent increase in buying following the Feb. 5 crash. On Feb. 6, the robo advisors on the platform saw a 57 percent increase in net buying versus the average day. (The firm’s average client age is 31 years old.)
“What we saw in the data across the robo and the self-directed space—again, predominantly millennials—is that they actually bought into the dip,” said William Capuzzi, CEO of Apex. “They saw an opportunity. They got plenty of information from their providers that told them, ‘Don’t panic,’ and ‘This is opportunities for you to buy.’”
I talked about all of this with Jim Goddard on Howestreet.com in this interview.
I can tell you that on my free email list I didn’t get a single email from one person that was concerned the day the DOW fell 1,000 points.
In 2016 right on the bottom I actually got a few phone calls from people who live in my town scared about the market.
Now no one is.
Just the opposite.
One reason why is that the big story after the drop was that it was caused by a VIX ETF malfunction and computer glitch.
The implication therefore is that nothing is really wrong. It was just all a blip.
I already wrote about the real reasons I think the stock market dropped the other week so I’m not going to go through that all again.
Right now the big question is what is next?
The technical analysis chart of the S&P 500 tells a simple story.
The DOW, S&P 500, and Nasdaq all fell to their 200-day moving averages on this recent drop and have bounced back up to their 50-day moving averages which are acting as resistance.
All of these indices are likely to pause here for the next couple of weeks.
And then I expect we’ll see them make a move to breakout or breakdown out of this zone that is starting to form to spark the next real move.
If it’s a drop it’s going to end up being a total mess if it comes with a continual decline in the US dollar and rise in interest rates at the same time.
There are several other key indicators that are key for stock market mastery I’m watching with members of my private Power Investor group and we’re preparing to act if a couple of key things are triggered.
If the market does drift like this for a few weeks though everyone is going to fall asleep and so they won’t be ready to react when the market starts to move again.
But you’ll be ready.
We’ll be ready.
I just released a new book detailing my number on trading setup. Grab it here: The Two Fold Formula.
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