As the S&P 500 has stalled out near late 2018 highs, sentiment readings have moved pretty much in line with what could be expected.  Bullish sentiment has fallen off of its multi-month high of 41.63% reached last week.  This week, bullish sentiment as seen through the AAII individual investor survey came in at 37.39%.  This drop is nothing too dramatic as it brings the percentage of optimistic investors just below the historical average of the survey of 38.5%.  It is also still near the upper end of the range it has been in for the past year.

Bears have taken all of the gains from declines in neutral and bullish sentiment.  Bearish sentiment rose this week to 26.75% off of 52-week lows of 20% from last week.  Like bullish sentiment, while this is a solid increase it does not necessarily leave the sentiment level at any sort of extreme.  At its current levels, it is under 4% away from its historical average.  With that said, it remains low relative to where it had been for the latter half of 2018.

As previously mentioned, neutral sentiment fell this week by 2.5% down to 35.87%.  Neutral sentiment has worked its way up since the market put in its bottom. Despite this week’s decline, it is still at fairly elevated levels.  Given these readings, individual investors seem to be showing some signs of hesitation as the market reaches resistance, but at the same time, are not expressing outright bearishness at these levels.

After a string of semi-concerning prints, this morning’s release of the Department of Labor’s weekly Initial Jobless Claims is offering a sigh of relief coming in below forecasts and below last week’s reading.  On a seasonally adjusted basis, claims came in at 223K.  That is 2K below estimates of 225K and below last week’s revised 226K.  At 223K, the indicator still remains in the dead middle of the range it has been in for the past few months.  While there has not been progress in claims making moves to new lows for some time now, by this account the labor market still appears to be healthy.  The streak of claims coming in under 300K has now grown to 209 consecutive weeks.

The four-week moving average for jobless claims also fell this week to 226.25K from 229.25K last week. It has now been two weeks since the indicator last saw a 52-week high.  If that trend keeps up it will certainly be a reassuring sign that the labor market is not changing course.  Looking ahead to next week, with a high of 239K coming off, another print consistent with the past few weeks would lead the average lower.

Finally, turning to the non-seasonally adjusted data, claims rose this week to 203.1K.  That 17K increase from last week is right in line with seasonal patterns.  The NSA number also came in well below the average for the current week of the year since 2000, 338.8K, and as the lowest reading for the week of the current cycle.

This morning, on the back of multiple days of declines, there are two notable changes in our Trend Analyzer tool. For starters, as we have repeatedly made note of in the past week, there have been fewer and fewer major index ETFs in downtrends.  In spite of recent declines, a few more moved out of their downtrends yesterday.  That leaves us with only the Micro-Cap ETF (IWC) still in a downtrend.  Every other index ETF has left their downtrend and is currently trending sideways.

The other major shift is the vast majority of these ETFs have now moved out of overbought territory and into neutral as a result of selling pressure over the past few sessions.  Currently, there are only two ETFs—the S&P 100 (OEF) and Nasdaq (QQQ)—that remain overbought.  The reason for this being these two have been the best performers over the past week.  Given the current market wide sell-off over the past several days, being the best performers does not necessarily mean they are in the green.  Both are lower than five days prior but to a much lesser of an extent than their peers.  Not a single index ETF has managed to see gains over the past week with losses ranging from very small (0.02% for QQQ) to over 3.5% (IWC).  Small caps have really been hit the hardest during this pullback.