A tool to help confirm the overall market trend is the Bullish Percent Index (BPI). The Bullish Index is a popular market “breadth” indicator used to gauge the internal strength/weakness of the market. Like many of the technical market internal indicators, it is used both to confirm a move in the market and as a non-confirmation and therefore divergence indication. The past few years or so Nasdaq stocks have led market direction. Though the Nasdaq index is at all-time highs that rise is primarily driven by five stocks. According to an article in CNBC Facebook, Amazon, Apple, Google and Microsoft accounted for 52 percent of the gain in the entire S&P 500. The Nasdaq BPI in a downtrend indicates the more stocks in the Nasdaq are selling off instead of rising, but the FAANG stocks along with Microsoft are sustaining the overall Nasdaq index at elevated levels. If recent market behavior holds up, expect the equity indexes to retrench from record highs as earning season progresses.

The National Association of Active Investment Managers (NAAIM) Exposure Index represents the average exposure to US Equity markets reported by NAAIM members. The blue bars depict a two-week moving average of the NAAIM managers’ responses. As the name indicates, the NAAIM Exposure Index provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks. The current survey result is for the week ending 11/01/2017. Third-quarter NAAIM exposure index averaged 79.40%. Last week the NAAIM exposure index was 71.67 %, and the current week’s exposure is at 60.18%. Recent analysis is playing out as advertised where pointed out “…Money managers appear to be taking profits and stashing some cash to bid on stocks based on earnings announcements…” Professional money managers are quietly moving to the exit. Their exposure to stocks, which had been holding near 90% in September, is down to 60% now as amateur investors grow more and more bullish. The last time this happened, to such an extent, was in 2014.