Wednesday, July 11, 2012

Energy and Financials Hold up the S&P 500

The S&P 500 and the NASDAQ are barely hanging onto their respective 50 day moving average as the Federal Reserve meeting minutes fail to spark buyers or sellers from jumping in with both feet. Crude oil was the big story on the day with the commodity jumping more than two points helping out the energy sector. Saving the S&P 500 the energy sector gained more than 1.4% on the day while the financial sector gained nearly .8%. Without the help from these sectors the S&P 500 would have sunk hard. Leading stocks continue to be sold off as another signal of weakness in this market. The market was able to overcome some selling after the Fed minutes and is a slants to the positive side of things. Big Wave Trading market model is neutral and we’ll need to see a big volume push to either side to get us in either direction. Volume was mixed on the day with surprisingly volume higher on the NYSE and lower on the NASDAQ. As of late we have seen the opposite situation where NASDAQ had seen the volume come in higher, but NYSE lower. Perhaps today may signal a change in the recent short-term trend (down), but it is hard to get too excited when leading stocks aren’t the ones showing the support. It appears the market is ignoring the lack of commitment currently from the Fed to do QE and wants to push higher. We aren’t about to guess where the market is heading next and we’ll continue to follow our rules based trend following system. Tomorrow morning the ECB will come out with a few items and it appears the market is expecting them to talk about increasing the fire power of the ESM and EFSF and LTRO. These are all short-term fixes to a long term problem. Unfortunately, for the Euronations they need to swallow the hard pill Estonia and Iceland did to recover from this problem. Defending the status quo will always lead to a bigger problem down-the-road. Our focus remains on following our rules and pushing forward regardless of the direction the market takes us in. While we may have opinions they aren’t mixed in with our trading. Rules based systematic approach to trading stocks is our niche to beating the market.

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