Uncertainty On Wall Street - Most In At Least 20 Years

Stocks rallied sharply on Thursday as they got close to the high end of their recent range. The S&P 500 was up 1.3%. It’s now only down 1.65% from its record high in July. We’ve had a nice combination of positive news on trade, the Hong Kong protests, and Brexit. It seems like just the prospect of a trade deal will get the S&P 500 to a new high. I’m basing that on the fact that there is no chance of a deal in the next few weeks and stocks are so close to a new record. Hope springs eternal.

Thursday’s Action Reviewed

Let's review the action of the day in markets and then describe the latest trade news. Nasdaq was up 1.75% because tech stocks like the idea of a trade deal. Russell 2000 was up because the financials rose due to the selloff in treasuries. VIX fell 1.06 to 16.27. The market just needs a couple more positive days to send the VIX to the low teens which would confirm the correction is over. We are very close to that moment.

The CNN fear and greed index rose an amazing 11 points to 39. It’s at the high end of the fear category. There were a bunch of changes which isn’t surprising given the big movement. The difference in stock and bond performance went from neutral to greed. There was a big selloff in bonds. S&P 500 versus its 125 day moving average went from fear to greed. Put to call ratio went from extreme fear to fear. Finally, the net new 52 week highs and lows on the NYSE went from extreme fear to fear.  

Financials and tech had a good day. They were the two biggest winners as they increased 1.9% and 2.16%. It was a true risk-off day as treasuries sold off along with utilities, real estate, and consumer staples. Those sectors fell 1.19%, 0.94%, and 0.73%. Those were the only losing sectors.

Much Confusion On Wall Street

Stock market sentiment is far from euphoric even though stocks have done well. If you tell a bear there is pessimism on Wall Street, they will point to the market’s performance and tell you that you are completely wrong. AAII sentiment survey shows differing results. In the investor sentiment survey, there were 39.5% bears. 

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