It was touch and go this week, but in the end and as suspected in last week's comments, the "this time is different" scenario will not play out. Prices are expected to head lower as the bullish extremes in sentiment unwind. This should NOT be a bull market top leading to a bear market. Bear markets come about when "buying the dip" fails. In other words, this overbought, over bullish market should correct providing a better risk adjusted buying opportunity in the future. Failure of a bounce to materialize at that point is a harbinger of a bear market. I expect to see a correction leading to a better risk adjusted buying opportunity, and this buying opportunity usually coincides with investors turning too bearish (i.e., bull signal). We are a ways from that point, but we will get there!!
Market-wide insider sentiment improved to its best level since the week ended August 31, 2010 as the market ran to a 27-month high before quickly giving back some gains. The Russell 2000 was the main sentiment driver and the Energy and Healthcare sectors were the main contributors within that group. Volume remained very light as the majority of insiders are locked-up ahead of their companies' earnings announcements, but we did see an uptick in buying in the wake of the market's peak and giveback early in the week. While not a strong signal, insiders nonetheless sent something other than a sell signal for the first time in 20 weeks."