Here's a daily chart of the Russell 2000:
Just this week I received a call from a client asking, "when is the correction coming?" These type of concerns from the general public are NOT indicative of a market top. When I start getting calls asking, "How high are we going?" then I'll start worrying about a top.
On a short term basis the AAII Sentiment Index, which measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months has evened out and is no longer lopsided toward a bullish persuasion which, as a contrarian indicator, is good for the market going into year end.
The ten day moving average of the ISE Sentiment Index, which measures opening long customer transactions to calculate bullish/bearish market direction is the highest it has been this year and although I haven't researched it may be the highest it's ever been. I have followed this sentiment indicator for a few years and generally speaking, a high reading has been predictive of rising equities. So this is giving us a very bullish signal moving into year end.
The only "bump" I see in the road in the short term is the monthly employment report due to be released on the first Friday in December. With all the worries that the Fed may start tapering after their December meeting, a strong non farm payrolls number may spook the markets and we may see some volatility. And, of course, the actual meeting and it's announcement on December 17th will be closely watched by market participants.
I am still very confident that with the dangerously low inflation rate in this country, regardless of how strong the employment report may be, the Fed will wait until their March meeting to start tapering. There are other reasons they will not move this year that I've addressed in a previous commentary.
In the meantime, enjoy the melt up! Bad news remains good news and good news seems to mean good news also. This is still the bull market everyone loves to hate! And for that reason this bull still has room to run ...
There will be no commentary next week. Happy Thanksgiving!