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Danny Riley

There are several subscriptions you can buy that will give you investor sentiment -- Investors Intelligence, MarketVane, SentimenTrader and American Association of Individual Investors, to name a few. They help traders gauge when the public gets too bullish or bearish. While the MrTopStep sentiment meter doesn’t claim to be as accurate as some of the “main” brands, we do think it will give you a flavor of how the world sees the stock market. With the S&P adding over $11 trillion in market value and up nearly 140% from its four-year low and buyers on a bull market rampage, the question isn't if the market will top, it’s when.

While Saturday, March 9, 2013, marked our webinar with Jeffrey Hirsch from the Stock Trader’s Almanac, it also was the four-year anniversary of the stock market bottom. If you were trading back then, it would be hard to forget all the economic turmoil and thrashing going on in the S&P futures. On the floor of the CME Group it was one of the busiest times in the futures market’s history. If we have learned anything about that time, it would be that when everyone is selling, it’s time to start buying.

As the S&P approaches the March quadruple witch this week and the end of the first quarter, a record level of new money continues pouring into stocks and the MrTopStep sentiment meter (see headlines below) is reaching a record level of bulls. From Bloomberg to USA TODAY, we could not find a negative story -- understandably, given the week we had, but we do think the media coverage reflects (and influences) market sentiment.

Bloomberg: U.S. Stocks Cap Best Weekly Rally Since January Amid Jobs Data
AP: NYSE stocks posting largest percentage increases
USATODAY : Bull market turns 4, but can it make it to 5?
Reuters: Wall Street looks for Fed to continue asset purchase through 2013: Reuters poll
DowJones.com: Dow Average Continues Its Record-Setting Advance
CNBC.com: Job Gains, Stronger Economy Boosting Stock Markets
CNNMoney: Dow marches to another new high
TheStreet.com: Dow Makes Record Highs a Habit After Robust Jobs Report
UPI.com: DJIA establishes a new peak

MrTopStep has been consistently bullish pointing out potential upside objectives for months -- 1464, 1484, 1505, 1530, 1550, 1586, 1610. We have hit five of our objectives and believe the upper targets are still in play, but the higher the index goes, the bigger the wall of worry gets. As you can see by the headlines, there are not many bears left in the pack.

Danny Riley is a 34-year veteran of the trading floor. He has helped run one of the largest S&P desks on the floor of the CME Group since 1985.

Our view: The Dow has averaged a gain of +26% over the last four years. If it were to continue on that path over the next three years, the compound gain would equal 3,100 in the S&P and Dow 29,000. That’s not going to happen. So far this year the S&P has closed higher 32 out of the 50 trading days, up 8 out of the last 10 trading days and up 5 in a row. That said, we lean to selling the early rally and buying weakness. As always, keep an eye on the 10-handle rule and please do not forget to use stops.

  • It’s 7:15 a.m. and the ESH is trading 1542.50, down 2 handles; crude is down 10 cents at 91.85; and the euro is up 2 pips at 1.3005.
  • In Asia, 6 out of 11 markets closed higher (Shanghai Comp. -0.35%, Hang Seng unchanged).
  • In Europe, 11 out of 12 markets are trading lower (CAC -0.48%, DAX-0.36%).
  • Total volume: 1.13mil ESH, 1.91mil ESM, 37k SPH and 36.5k SPM traded.
  • Fair value: S&P -1.43, NASDAQ -3.86
  • Economic calendar: No scheduled economic reports


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DISCLAIMER: The information and data in the above report were obtained from sources considered reliable. Opinions, market data, and recommendations are subject to change at any time. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any commodities or securities. MrTopStep, its officers, directors and its contributors may, in the normal course of business, have position(s) which may or may not agree with the opinions expressed in this report.