A bigger drop in initial jobless claims did very little holding buyers back in the early going. Stocks would hit their high for the day just after the opening bell. Volume ran higher throughout the day even before the end of the month rebalancing took place. QCOM initial breakout looked strong, but sellers took over pushing the stock lower. Other leading stocks like AMZN have suffered similar patterns after earnings releases. FB was able to find its footing despite not closing at the highs. The Dow and S&P 500 both notched distribution with the NASDAQ avoiding back to back distribution days. Distribution still hasn't added up to cause concern just yet. January was a good month for stocks and our uptrend still remains.
There is plenty of talk of a correction and many are trying to be the one who calls "it." We aren't going to call it or not, but the probability of one has certainly crept up. Distribution days have yet to build up to say we need to be vigilant yet. However, sentiment has been running hot all month long. AAII Bulls fell week over week to 48% from 53%. 53% is not overly extreme, but elevated and even 48% is high. II Bulls rose to 54.3%, but it was the NAAIM sentiment that has given an extreme reading of 104.25. The only reading above 100 came on 3/1/2007 when the index posted 100.05. Money managers are levered long here and quite possibly signaling at the very least a short-term top. We aren't about to bet on this and will wait for our signals. It doesn't hurt to see where we could have a possible turn.
Unfortunately the Federal Reserve has turned the Non-Farm Payroll (NYSE:NFP) figure even more important. Unemployment is set to come in at 7.8% with roughly 155,000 jobs to be added. Any guess would be as good as the expectations, but the reaction to the number will be important. If the trend continues with the labor participation rate we should see it continue to fall helping lower the unemployment rate. It is almost hard to believe any number would be taken negatively by the market with the Fed pumping $85 billion into the market.
We had a heck of a month and January proved staying with leaders and price action is the best course of action. Have a great weekend and enjoy the Super Bowl!
FXYDOWNTREND NO CHANGE1/31/2013107.18-0.39%
TLTDOWNTREND NO CHANGE1/31/2013116.750.49%
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.