Wednesday, April 04, 2012

Despite Late Day Rally Stocks Fall Hard as Volume Rises

Today’s market session sends the market into correction mode switching the Big Wave Trading market model to neutral. Selling dominated the session as gold and silver prices fell hard on the news the Fed would not immediately step in with QE3. Volume jumped on the day as the money printing thesis being struck down and longs exited. The late day push was a bit weak, but was able to get this market well off the lows of the session. Despite the rally the damage was done and we’ll adjust to the market.

Following the FOMC meeting minutes yesterday it is quite clear the market as a whole is a junky hooked on the monetary “juice.” If the central bank will stay true to its word we’ll get a sense of how strong this market really is. During the most recent bank stress test the central bank used a 50% equity decline as a scenario, but would it step in prior to a 50% equity decline? If the market falls from here it will prove this market has been a sham propped up by the Federal Reserve. Whatever the case may be we’ll be on top of the market.

As it stands now the market is in correction mode, but we aren’t in a full sell mode. The McClellan Oscillator now sits at -193 at an extreme oversold level. While not perfect it has been an area where stocks have been able to rebound from. Just a few weeks ago the oscillator was in a similar position. It may be a bit obvious to sell here, but make sure you stay disciplined in your strategy. If you have sell signals take them! It still would not surprise me to see the market gets a lift in the next few days to clear some oversold levels.

Tomorrow’s action will certainly be interesting as I wouldn’t be surprised if this market moves lower ahead of Friday’s job figure. Stick with your game plan!

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