Over the past few months we have been in a risk-on, risk-off trading environment, and shares have fluctuated within a clear trading range. There seems to be a renewed willingness to take on some risk in September as economic data so far in the month has been much better than the data we received in late August. Perhaps most importantly, the private non-farm payrolls in August were better than expected and last week's jobless claims fell more than expected. There has been some census noise recently, but the market nevertheless took the news positively. In addition, recent housing data hasn’t been as bad as feared.
These two issues - housing and unemployment - had created a lot of fear in the markets in August that led to the selling of stocks and the buying of Treasuries.
Last week, in contrast, we saw a dramatic sell-off in Treasuries as money slowly trickled back into stocks. However, retail investor sentiment is still pretty bad (although much improved over the past couple weeks), and the retail investor remains largely on the sidelines right now.