Monday, July 08, 2013

Consumer Credit Jumps as Stocks End off Their Highs

The market got off to a good start thanks to Europe rebounding after Friday’s dismal performance. For the NASDAQ the high of the day would come shortly after the open and it would fall from there. The Dow fared the best today gaining 59 basis points, but it too was off its high of the day. Volume rose across the board. Friday’s volume figure was lowest for a full day of trading. Perhaps traders were still recovering from the holiday weekend. A boring day in the markets with sluggish price action and we are still without a follow-through day. Russell 2000 hit an all-time high today before pulling back, but the small cap stock index has been the best performer. It is a good sign to see the small caps to lead the way. However, we are 9 days deep into this rally attempt and the market has unable to secure a follow-through day. We could certainly get it tomorrow or a week from now, but even if we do we won’t be expecting much from it. Typically your powerful rallies will come from a follow-through day occurring on days 4 through 7. While we won’t rule out a new rally our expectations for gains will be tempered. Consumer credit rose much more than expected at 19.6 billion dollars. Expectations were for a rise of 12.5 billion dollars. Auto loans and student loans have been the primary driver of consumer credit and while many will take a rise in credit as a positive is it really just another bubble? We know student loan debt is an issue as the market has increased over one trillion dollars. At some point there will be a tipping point where we’ll no longer be able to support such a large amount of debt. Alcoa (AA) kicked off earnings beat street estimates. Expectations for second quarter earnings are quite high from Wall Street. However, pre-announcements have been negative. Follow price and have a process and ignore the noise. Stick with Big Wave Trading.

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