Thursday, May 23, 2013

Russell 2000 Escapes with Gains as the Market Finishes well off its Lows of the Session

It all began in Japan where the Nikkei hit an all-time high only to end its day lower down by more than 7%. Selling swept the globe where Europe was hit hard, but it was the United States market to see some resiliency. A better than expected Jobless Claims figure did help the mood, but it was likely to due to the larger than normal POMO from the Federal Reserve. More than $3 billion was pumped into the market from the Fed and was likely “the” catalyst pushing stocks off their lows. At the open the market hit pretty extreme oversold readings and the move off the lows is not all that surprising. Volume was lower on the day even with the lower open. Institutions weren’t all that excited to jump right back into the market. Our uptrend was hit, but it is still standing. Yesterday was a great example of why chasing stocks well beyond an acceptable price is dangerous. But, panic selling is just as dangerous. Plenty of stocks gapped lower like DDD to only close much higher displaying excellent strength. Reacting with emotion will not get you anywhere but heart ache city. Avoid making costly mistakes and join Big Wave Trading! We’ll steer you clear of making mistakes. Get on board. Sentiment from inviduals jumped to lofty levels, but away from their most extreme readings. II Bulls hit 55% an extreme reading, but AAII Bulls only registered 48.97%. Near 50%, but still below the ’13 high as well as ’12, ’11, and ’10. AAII bears slipped to a new low for the year at 21.58%. However, it is still well above the readings seen in ’10 and ’12. We were at lofty levels, but we simply cannot declare a market top without further evidence. That evidence is price and market leaders. Anything is possible in the game we call the stock market. April we had piled up quite a bit of nasty distribution days and we were able to climb out of it. Will this time be any different? Perhaps, but we we aren’t going go out and declare a top. It boils down to price trends and your process to take advantage of price trends. We are sticking with our process. Cut your losses and ride your winners.

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