Who Will the Market Flirt With Today?

It's Valentine's Day, and that begs the question: What will the market love today?

So far this week we have seen not one but two days of love for the non-tech stocks and two days of love for the tech stocks. I am excited to see which group wins the week in the love column. For example, will we see what we saw on Tuesday, where breadth was good but the index movers sat it out or will we see what we saw on Wednesday, where the index movers took control and investors loved them instead?

As you know lately, the love for non-tech stocks has been more like a one night stand. They get some love for a day and then that's it, the love affair is over. Personally, I would much prefer the love affair last longer than one day.

On Thursday the small caps out performed but breadth was flat so I'm not sure we can put too much on the side of small cap love. I continue to focus on the ratio of the Bank Index to the S&P. I am keen to believe it is bottoming the way it bottomed back in October but clearly the stocks themselves are in a different place and so far the ratio has yet to get going.

The one place there was some love this week was for the overall market indexes. We have the day traders at the American Association of Individual Investors' weekly survey falling in love with stocks again. The bulls were up by a bit more than seven points to 41.3%, and the bears were down almost nine points to 32.3%. This means the bulls are closing in on the high reading from four weeks ago, just before the coronavirus hit and stocks took their first tumble.

Lest you think it's just the AAII folks who jump around on the love front, the National Association of Active Investment Managers (NAAIM) saw their exposure (to stocks) fall to a little more than 60% a week ago and now they are at 86%. Needless to say complacency is back in the market.

Basically Thursday's action changed very little in the market. There wasn't enough movement to change any of the indicators and there was enough selling on this minor down day to shift anything either.

We are left with a market that is reaching a short-term overbought reading. The Nasdaq Momentum Indicator got overbought on Thursday and my own Overbought/Oversold Oscillator will get overbought on Tuesday. Let's see how much love the market gets while it's overbought.