Thursday, January 31, 2013
A bigger drop in initial jobless claims did very little holding buyers back in the early going. Stocks would hit their high for the day just after the opening bell. Volume ran higher throughout the day even before the end of the month rebalancing took place. QCOM initial breakout looked strong, but sellers took over pushing the stock lower. Other leading stocks like AMZN have suffered similar patterns after earnings releases. FB was able to find its footing despite not closing at the highs. The Dow and S&P 500 both notched distribution with the NASDAQ avoiding back to back distribution days. Distribution still hasn’t added up to cause concern just yet. January was a good month for stocks and our uptrend still remains. There is plenty of talk of a correction and many are trying to be the one who calls “it.” We aren’t going to call it or not, but the probability of one has certainly crept up. Distribution days have yet to build up to say we need to be vigilant yet. However, sentiment has been running hot all month long. AAII Bulls fell week over week to 48% from 53%. 53% is not overly extreme, but elevated and even 48% is high. II Bulls rose to 54.3%, but it was the NAAIM sentiment that has given an extreme reading of 104.25. The only reading above 100 came on 3/1/2007 when the index posted 100.05. Money managers are levered long here and quite possibly signaling at the very least a short-term top. We aren’t about to bet on this and will wait for our signals. It doesn’t hurt to see where we could have a possible turn. Unfortunately the Federal Reserve has turned the Non-Farm Payroll (NFP) figure even more important. Unemployment is set to come in at 7.8% with roughly 155,000 jobs to be added. Any guess would be as good as the expectations, but the reaction to the number will be important. If the trend continues with the labor participation rate we should see it continue to fall helping lower the unemployment rate. It is almost hard to believe any number would be taken negatively by the market with the Fed pumping $85 billion into the market. We had a heck of a month and January proved staying with leaders and price action is the best course of action. Have a great weekend and enjoy the Super Bowl! TICKER ST TREND CHANGE? DATE CLOSE % SPY UPTREND NO CHANGE 1/31/2013 149.70 -0.25% IWM UPTREND NO CHANGE 1/31/2013 89.58 0.69% QQQ UPTREND NO CHANGE 1/31/2013 66.87 -0.22% USO UPTREND NO CHANGE 1/31/2013 35.28 -0.59% UNG UPTREND NO CHANGE 1/31/2013 18.76 -0.05% GLD UPTREND NO CHANGE 1/31/2013 161.20 -0.61% SLV UPTREND NO CHANGE 1/31/2013 30.44 -1.55% DBC UPTREND NO CHANGE 1/31/2013 28.47 -0.04% FXY DOWNTREND NO CHANGE 1/31/2013 107.18 -0.39% FXE UPTREND NO CHANGE 1/31/2013 134.72 0.10% TLT DOWNTREND NO CHANGE 1/31/2013 116.75 0.49%
Wednesday, January 30, 2013
The market was dealt a blow with the fourth quarter GDP printed at -.01%. Expectations were for fourth quarter GDP to come in at 1.1%. Initially futures fell, but were able find their footing heading into the open. US Treasury 10 year yields jumped above 2% as sellers anticipated the Fed may be ending their latest round of asset purchases. All eyes were on the Federal Reserve and its policy statement at 2:15 pm EST. We did not get any changes from the Fed, but we did see the market sell off after the policy statement. Small cap stocks led the decline with the Russell 2000 fell more than one percent. Today was the first day we got a real day of distribution on the NASDAQ in quite some time. Volume on the NYSE fell on the day avoiding distribution. Today certainly doesn’t end our uptrend, but we do need to see this market avoid piling up distribution days. The commentary regarding the GDP figure was quite funny. GDP counts government spending in its calculation and therefore if the government spends more or less it will impact GDP. In the fourth quarter GDP fell in part due to defense spending. However, all those saying GDP was good outside of the defense spending do not make the same argument for the third quarter. In the third quarter government spending was the only thing keeping GDP in positive territory. Yet, we didn’t hear how weak the GDP report was because it was boosted by government. In the end, GDP shrank and if revisions follow the historical trend this figure is likely to be revised lower. Does it matter? Well, the Fed has pumped trillions and we can’t even print a decent GDP figure is pathetic. In the market it doesn’t impact us as we focus on leaders and price action. Ignore the noise. The Yen continues to fall with the Euro rallying. At some point we are going to see the Yen at its breaking point. Its oversold condition does not matter as the currency is in free fall. Keep an eye on how currencies react to this situation. The Japanese are hell bent on printing their way out of their economic troubles. It hasn’t worked so far and now they may be on a path of no return with its currency. Currency crisis happen when the market loses confidence in its viability. This should be an interesting next few weeks. Short-term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 1/30/2013 150.07 -0.39% IWM UPTREND NO CHANGE 1/30/2013 88.97 -1.20% QQQ UPTREND NO CHANGE 1/30/2013 67.02 -0.21% USO UPTREND NO CHANGE 1/30/2013 35.49 0.57% UNG UPTREND NO CHANGE 1/30/2013 18.77 2.23% GLD UPTREND NO CHANGE 1/30/2013 162.19 0.75% SLV UPTREND NO CHANGE 1/30/2013 30.92 1.98% DBC UPTREND NO CHANGE 1/30/2013 28.48 1.14% FXY DOWNTREND NO CHANGE 1/30/2013 107.6 -0.42% FXE UPTREND NO CHANGE 1/30/2013 134.59 0.55% TLT DOWNTREND CHANGE 1/30/2013 116.95 -0.17% TLT flipped back to a downtrend today. No other changes.
Tuesday, January 29, 2013
Once again buyers support the market at the lows. It has been the trend as of late to find buyers as the market appears to be in free fall. Positive data from Case-Shiller did help the mood. Volume rose on the day across the board showing institutions were quite active in the market. Technology stocks, despite AAPL finishing in the green had a tough day with the likes of VMW, WDC, and STX had tough days. This market continues to hit new highs despite “overbought” conditions. The market now turns its attention to tomorrow’s release of fourth quarter GDP and the FOMC meeting minutes. Tomorrow will be a big day for the market with GDP and the Fed. Fed days are always fun with wild intraday swings. GDP estimates range between 1.1-1.5%, but even if GDP prints at 1.5% is still very pathetic. Despite all the Fed’s interventions the economy can only grow at 1.5% is really pathetic. The market may continue its trend tomorrow regardless of the GDP print. Knowing what the GDP figure will be won’t help you in tomorrow’s market. We could guess if the Federal Reserve does not change its language in its policy statement the market will continue higher. If the Fed hints at winding down its massive asset purchase program may be a reason for a decline, but it is anyone’s guess. We continue to be in an uptrend and until we get our sell signals we’ll stay on the long side of the market. We still have a few minor hiccups in the market right now. VMW, WDC, and STX were sore spots on the day and even with good earnings from F the stock couldn’t find buyers supporting higher prices. YHOO posted good results, but the stock gapped to the upside only to find itself lower on the day. Perhaps we are seeing some exhaustion, but not nearly enough to trigger a sell signal. Stay disciplined and keep your emotions in check! Short-term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 1/29/2013 150.66 0.39% IWM UPTREND NO CHANGE 1/29/2013 90.05 0.06% QQQ UPTREND NO CHANGE 1/29/2013 67.16 0.01% USO UPTREND NO CHANGE 1/29/2013 35.29 1.00% UNG UPTREND NO CHANGE 1/29/2013 18.36 -1.02% GLD UPTREND NO CHANGE 1/29/2013 160.99 0.44% SLV UPTREND NO CHANGE 1/29/2013 30.32 1.57% DBC UPTREND NO CHANGE 1/29/2013 28.16 0.57% FXY DOWNTREND NO CHANGE 1/29/2013 108.05 0.07% FXE UPTREND NO CHANGE 1/29/2013 133.86 0.27% TLT UPTREND NO CHANGE 1/29/2013 117.6 -0.55% Crude oil – USO saw a big jump today along with SLV. Rising commodity prices will certainly squeeze the American consumer. Stay tuned.
Monday, January 28, 2013
Small losses on the S&P 500 and Dow ended their win streaks as AAPL boosts the NASDAQ to close in the green. Durable goods orders were boosted by BA orders coming in better than expected. Disappointing pending home sales were blamed on low supply, but nonetheless there weren’t as many pending home sales as expected. The VIX was able to hold its mid-point despite the market getting support at the lows. There were a few troubling signs with 3D printers facing heavy volume selling. Recent long signals haven’t been working as well suggesting we may be in for the market to take a rest. Our uptrend is still intact, but we do have a few warning signs of a possible pause in the market rally. DDD and SSYS faced big losses today as these stocks have moved quite a bit from the 11/16 low in the market. It doesn’t matter if these stocks are the way of the future, for now the heavy volume selling suggests these stocks have further to correct. Today’s action is why we have our exit rules with our stocks. Outside of these stocks we don’t see too many trouble signs other than a few new longs not working immediately. KORS another leading stock had trouble today, but LNKD had no issues breaking out. It is very possible we are rotating into new names and this market will resume closing at highs by week’s end. Stay disciplined. Tomorrow we’ll get the Case-Shiller index regarding the housing market. The index has shown much improvement since the utter disaster back in 2008 and 2009. However, it will be Wednesday when we get a reading on fourth quarter GDP growth as well as the FOMC rate decision. Federal Reserve days tend to be positive for stocks and Wednesday shouldn’t be any different. Of course we’ll allow our signals guide us via price, but the reaction to the comments by the Fed should be entertaining. We aren’t about to call a market top or even a correction, but given the extreme sentiment readings last week and a few leaders getting hit the probability of a correction is greater. Stick to your game plan and execute. Short-Term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 1/28/2013 150.07 -0.12% IWM UPTREND NO CHANGE 1/28/2013 90.00 0.07% QQQ UPTREND NO CHANGE 1/28/2013 67.15 0.22% USO UPTREND NO CHANGE 1/28/2013 34.94 0.46% UNG UPTREND NO CHANGE 1/28/2013 18.55 -4.97% GLD UPTREND NO CHANGE 1/28/2013 160.29 -0.22% SLV UPTREND NO CHANGE 1/28/2013 29.85 -1.19% DBC UPTREND NO CHANGE 1/28/2013 28.00 -0.04% FXY DOWNTREND NO CHANGE 1/28/2013 107.97 0.14% FXE UPTREND NO CHANGE 1/28/2013 133.5 -0.03% TLT UPTREND NO CHANGE 1/28/2013 118.03 -0.36%
Sunday, January 27, 2013
The Big Wave Trading Portfolio remains under BUY signals across the board. There is nothing still to do or think too much about as the trend higher is smooth and has come under very little pressure minus two minor distribution days in the Nasdaq Composite. Overall, many traders believe that it is time for us to take a rest or pullback. However, traders have been thinking this for a while and until it actually happens trading on that notion is not wise. On the sentiment front, it is getting very bullish out there for sure. However, nobody said it can’t get more bullish. Who is to say that bulls can not hit 90% on the Investors Intelligence survey? Who is to say it can not hit 90% on the AAII survey? Who is to say that the VIX can’t trade below 5 or hell even below 1? I know that is quite irrational but nothing about what has happened since 2008 has been rational. There is no need to believe it is time to start now. We would love to see a pullback here as it would most likely lead to a very nice consolidation period in many leading stocks that would make their upcoming next round of breakouts that much more powerful. Our biggest concern with a non-stop uptrend is the possibility of a hard reversal that might lead to a sustained downturn instead of a buying opportunity. However, that being said, it is all talking points at this juncture. All that matters is price, and sometimes volume (though it hasn’t mattered since 2009), and that is what we will continue to focus on. Set buy stops on your favorite stocks nearing breakouts to make sure you get long at the exact pivot points and you will do fine. If you wait till the EOD to buy breakouts in this market environment, you greatly increase your chances of getting caught in a normal shakeout/pullback in the stock. Great luck next week everyone. I wish you all a very prosperous week. Aloha. Top Current Holdings – Percent Return – Date of Signal CSU long – 71% – 9/4/12 HEES long – 64% – 9/4/12 CAMP long – 48% – 4/26/12 VRNM short – 48% – 4/10/12 FLT long – 35% – 9/6/12 ASTM short – 35% – 7/17/12 GNMK long – 30% – 11/16/12 POWR long – 29% – 12/11/12 EAC long – 27% – 12/17/12 HIMX long – 26% – 12/19/12
Thursday, January 24, 2013
AAPL was the talk of the street as the stock took a plunge on fourth quarter earnings. Initial jobless claims came in better than expected helping out on the job front (we’ll forget the surging number of people receiving food stamps and long-term disability). The market appeared poised to continue much higher with the market shaking off AAPL’s move. Just before noon time the NASDAQ had almost erased all of the day’s losses but sellers took over. Sellers dominated into the 2:00 pm EST hour when so when the VIX began to fall back helping the market come off the lows. NYSE and NASDAQ volume were higher giving the NASDAQ a day of distribution and a stall day for the S&P 500. We still have our uptrend and a rest here would make sense. However if this were to turn more sinister we have our exit plan. Gold and silver took a big hit today while other commodities were able to hold up. Gold and silver have yet to push higher despite the Federal’s Reserve’s desire to print $85 billion a month without an expiration date. Perhaps the medals know something about next week’s Fed meeting that the other market don’t. For now, both remain in their short-term uptrends despite their action today. Sentiment is at extremes with many surveys at multi-year highs. The AAII survey showed bulls at 53% highest since last February. Hulbert’s Financial Digest reading is at a level not seen since 2000. While this may be an indication upside may be limited we simply cannot trade off of it. The market may very well turn over here and head lower, but it is anyone’s guess and why we have sell rules in place. Stick to your game plan and execute. Short-term ETF Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 1/24/2013 149.41 0.03% IWM UPTREND NO CHANGE 1/24/2013 66.66 -1.38% USO UPTREND NO CHANGE 1/24/2013 34.76 0.43% UNG UPTREND NO CHANGE 1/24/2013 19.53 -2.35% GLD UPTREND NO CHANGE 1/24/2013 161.42 -1.10% SLV UPTREND NO CHANGE 1/24/2013 30.65 -1.73% DBC UPTREND NO CHANGE 1/24/2013 28.07 -0.07% FXY DOWNTREND NO CHANGE 1/24/2013 108.66 -1.69% FXE UPTREND NO CHANGE 1/24/2013 132.7 0.41% TLT UPTREND CHANGE 1/24/2013 120.09 -0.35% TLT signals a change in trend from downtrend to uptrend. Have a great weekend.
Wednesday, January 23, 2013
Attention on the day was aimed at earning’s releases at the close of the day. Stocks were dealt a blow with the IMF cutting its global forecast to 3.5% from 3.6%. While not a big blow to a forecast, but the IMF pointed to Europe and its inability to grow as a primary concern. IBM and GOOG helped boost the tech sector on the day. IBM added 66 points to the Dow accounting for majority of the index gains. GOOG broke out during the session, but was unable to hold its pivot at the close. Volume was lower across the board as the market moved higher, but this has been a growing theme as price continues to be the primary indicator. One negative on the session was the inability for Small Caps to lead the session, but one day does not make a trend. Our uptrend continues to remain in place and we’ll continue to look for higher prices. During the after-hours session NFLX blew the doors off its earnings report. More importantly the company guided higher than its dismal estimates. The stock jumped another 30% in the after-hours session making any entry almost impossible. The stock has been beaten up, but has been trying to make its way back to the spotlight. A jump of 30% seems a bit extreme and will offer an exit for those who are long to book some gains. Will it go higher is anyone’s guess, but a 28% gap to the upside is a gift worth taking. AAPL earnings disappointed the market as revenues were light and guidance was below expectations. The stock printed a 480 handle during the after-hours session but has spent most of its time down 5%. AAPL has been the black eye for the market, but many tend to forget it accounted for 50% of NASDAQ’s gain early last year. The stock simply has run into the law of large numbers and the stock is simply over owned. Plenty of people will be in the stock looking to catch a bottom, but for now we’ll stay away unless we see a buy signal. For now the stock is dead to us on the long side. As of last night the companies reporting earnings 70% of them have lowered first quarter outlooks. Looking at profits for the fourth quarter stands at 3% against expectations of 11% which will certainly weigh on those relying on fundamental models. AAPL and banks accounted for the majority of earnings growth during the past 12 months and with only 3% growth in place with banks reporting should hint at what is to come for the first quarter of this year. It is anyone’s best guess what multiple the market will trade at, but if growth continues to slow in the names that have been the engine of profits the market will reprice. AAPL will certainly put a lot of pressure on the NASDAQ tomorrow. Stick to your trading plan and let the noise from Wall Street fall on deaf ears. Short term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 1/23/2013 149.37 0.16% IWM UPTREND NO CHANGE 1/23/2013 89.00 -0.24% QQQ UPTREND NO CHANGE 1/23/2013 67.59 0.61% USO UPTREND NO CHANGE 1/23/2013 34.61 -1.14% UNG UPTREND NO CHANGE 1/23/2013 20.00 0.15% GLD UPTREND NO CHANGE 1/23/2013 163.21 -0.28% SLV UPTREND NO CHANGE 1/23/2013 31.19 0.22% DBC UPTREND NO CHANGE 1/23/2013 28.09 0.11% FXY DOWNTRENDNO CHANGE 1/23/2013 110.53 0.04% FXE UPTREND NO CHANGE 1/23/2013 132.16 0.01% TLT DOWNTRENDNO CHANGE 1/23/2013 120.27 -0.15%
Tuesday, January 22, 2013
The market was able to push higher despite disappointing news from existing home sales as well as data from the Richmond Fed manufacturing index. Existing home sales were expected to rise 1.2% but fell 1% and last month’s big number was revised from 5.9% to 4.8%. Richmond Fed manufacturing index fell to -12 while the market expected a reading of +5. Despite the disappointing economic headlines the market was able to push higher. Volume could not match Friday’s option expiry inflated figures. GOOG kicked off big tech earnings season with AAPL set to report tomorrow. The trend continues for stocks and until we have price action suggesting otherwise we’ll stay on this wave. Key ETFs and their short term trends: TICKER ST TREND DATE CLOSE % SPY UPTREND 1/22/2013 149.13 0.54% IWM UPTREND 1/22/2013 89.21 0.72% QQQ UPTREND 1/22/2013 67.18 0.16% USO UPTREND 1/22/2013 35.01 0.69% GLD UPTREND 1/22/2013 163.67 0.36% SLV UPTREND 1/22/2013 31.12 1.01% DBC UPTREND 1/22/2013 28.06 0.29% FXY DOWNTREND 1/22/2013 110.49 1.48% FXE UPTREND 1/22/2013 132.15 -0.03% TLT DOWNTREND 1/22/2013 120.04 0.19% IBM, GOOG, CREE, and ISRG catapulted higher in the after-hour session as Traders cheered their earnings report. TXN did not fare well as the stock is currently lower by 72bps, but completely overshadowed by other reports. The QQQs were trading 45 basis points higher while SPYs were trading 9 basis points higher. GOOG has yet to trigger a buy signal, but if it can break above its pivot would be a breakout candidate. Given the earnings and volume following earnings releases volume should be well above average tomorrow. Last night in our Gold forums we posted regarding the sentiment situation. Sentiment across the board is bullish, but not at extremes just yet. Perhaps with today’s move we’ll see a change in sentiment, but for now we aren’t at extremes. On the other hand, the number of stocks above their 50 day moving average is at highs suggesting there is a higher probability we’ll see stocks take a breather, after all the Dow is up 8 days out of 9 and the S&P 500 up 5 days in a row. Know one knows when this party will end or if it will ever end, but we have our exit plan and when we get our exit signals we’ll take them. There have been very few stocks showing sell signals suggesting we can go higher. Commodities continue to be very interesting with USO and DBC inching higher. Crude oil ended the day with a 96 handle and is poised to continue its recent uptrend. No doubt will higher crude prices continue to put upward pressure on prices. The endless QE the Federal Reserve has embarked on will likely impact prices of every day goods and services. Pain at the pump will soon rise as a concern again, but for now prices are headed higher. Have a great week.
Sunday, January 20, 2013
The Big Wave Trading portfolios all remain under a strong BUY signal as stocks tacked on more gains the past week with volume coming in higher than the previous week. Overall, it was another strong week and nothing out there is currently of concern on our radar. Despite the low VIX, the high amount of bulls in the Investors Intelligence survey, and lack of extremely strong volume when we do rally, we find nothing out there that indicates this rally is in danger of failing any time soon. As long as we continue to see breakouts and stocks setting up in tight consolidation patterns, we will continue to operate from the long side accordingly. While some stocks like SSYS and DDD are beginning to get ahead of themselves, overall there is still a lot of upside potential left in many high-quality CANSLIM stocks and stocks with low P/E ratios that offer high dividends. As long as they continue to move higher and set up as they are, there is simply no reason to be looking for a top any time soon. Since there is not much to do but continue to set buy stop orders on stocks nearing breakouts, there is not much to address this weekend. While I do hear some commentators trying to call a top, we believe that price is truth and fresh breakouts from strong consolidation patterns are more important than talking heads. We will become cautious on this rally after we either see stocks go into parabolic price gains on arithmetic charts, see stocks breakout and then reverse (like NTE recently) in mass, or see 5-6 distribution days hit the overall market in 2-3 weeks. Until we see this happen, as previously noted, we will continue to hunt for strong leading stocks setting up in consolidation patterns nearing breakouts and trade accordingly. Remember, even though the VIX is now below the 13 level, it can go much lower. In 2007 the VIX went below 9. That means that we could still see a substantial rally in US equities, despite the low VIX Top Current Holdings – Percent Return – Date of Signal CSU long – 65% – 9/4/12 HEES long – 56% – 9/4/12 CAMP long – 49% – 4/26/12 VRNM short – 44% – 4/10/12 POWR long – 33% – 12/11/12 FLT long – 32% – 9/6/12 ASTM short – 31% – 7/17/12 GNMK long – 28% – 11/16/12 HIMX long – 25% – 12/9/12
Thursday, January 17, 2013
A positive housing start figure gave a big boost to the futures this morning including homebuilders after housing starts jumped 12% month-over-month. Initial jobless claims fell more than expected and despite a very negative reading out of the Philadelphia Federal Reserve manufacturing index the market was able to push higher. Volume on the indexes rose above average across the board, but overall volume still remains anemic. By 2:30 the market was at its highs for the session only to be disrupted by selling at the end of the session. While the end-of-day action was not ideal it was still a very good session for the market. The move in the market today has, in our minds wiped out all the distribution days we have seen in the past four weeks. Any distribution here we’ll begin to count and watch carefully. The lows of this week must hold as well if this market wants to continue hitting 52 week highs. You’ll hear plenty of pundits tell you where they are predicting the market should head, but they’ll be wrong. Predictions are for those who need to feel smart and need to feel they know more than you. If predictions were often right you’d have a heck of a lot more “wealthy” traders sitting around. Know what you are trading, where your entries are, how much to trade, and where you exit and forget the noise generated by Wall Street. Tomorrow we’ll get options expiry and a boat load of volume. Options expiry is a day where volume can be completely ignored. It will also be interesting to see how price reacts to the volume when we have raced higher after the Fiscal Cliff “can kick” solution. We can only trade off the current price information we have and not what we “think” may happen. Anything can happen and will happen and we accept this in our trading methodology. Get out and have a great weekend!
Wednesday, January 16, 2013
Stocks gain little traction on the day despite AAPL moving more than 4% on the day. BA weighed on the Dow Jones Industrial average as more problems with its 787 plague the company. Volume was lower across the board, but nearly 10% lower on the NASDAQ. Volume continues to be non-existent as the market consolidates. We believe it to be a good thing at this point in time. The last hour of trading saw the major averages pull back from the highs of the session despite GS move after reporting earnings in the morning. Even with BAC moving higher by 2% the XLF could only close with a gain worth a penny. This market continues to work off the overbought conditions keeping our uptrend in place. However, we do need to see this market push into higher territory soon. GS blew the doors off its earnings this morning. JPM missed their revenue mark, but was still able to close one penny off its 52 week highs. Given the action from GS, JPM, and BAC the XLF could only eek out a one penny gain. The ETF still appears to be moving higher and we would expect it to do so if we continue to see new highs from financials. BAC, PNC, and C are set to report earnings Thursday morning and will be the talk of CNBC. The slew of economic data this morning did very little to move the markets very much. Even with the NAHB survey didn’t derail the markets. For the first time in 8 months homebuilder sentiment did not see gains. After 8 months you would think sentiment would calm down and it did. Homebuilding stocks appear to be holding up well despite the lack of good news from sentiment. Do not forget the incredible run these stocks have been on and know your proper exit points. The market still appears to be moving higher with all the moves we are seeing from individual stock names. To protect ourselves from being wrong we have a proper exit strategy and so should you.
Tuesday, January 15, 2013
Big headlines of the day were better than expected retail sales and the slide in AAPL. Going unnoticed was the outside reversal the Russell 2000 index staged. Not going unnoticed was the heavy volume selling in AAPL for the second straight day. The stock continues to see sellers and has now closed under $500 mark for the first time since February 2012. DELL gained for the second straight day taking the sting out of the slide in AAPL as rumors about a possible takeout swirl. Not a bad day for the markets, but outside the Russell 2000 we do not see the major averages pushing to new highs. Whether we are consolidating or not remains to be seen, but the fact we can’t move higher immediately does give us pause. Until we get real sell signals this uptrend still has a chance to push higher. Another big headline of the day was FB news of their new search tool. Lacking the big “wow” factor the stock ended lower on the day. FB has had quite the run and sellers took advantage of the news and sold the stock lower. Does it mean it continues? No one knows and we have yet to see a true sell signal in the stock. We would welcome the stock to pause setup a base and breakout. For now, we’ll see how it progresses over the next few trading sessions. If you are long, make sure you have a game plan on where your exits are. Tomorrow morning we’ll get earnings releases from JPM at 7am and GS at 7:30am. Both stocks have moved out of bases and are higher at the moment. Either stock would not be buyable if they were to gap to the upside. Let’s not forget banks were a big driver for growth in the S&P 500 earnings last year and will be important for the trend to continue for banks. One could think they should have great earnings with the Federal Reserve Bank buying up their mortgage portfolios, but we really do not have a clue. Both stocks will drive the action tomorrow along with volume. How they end up will be key to how the S&P 500 acts. A perfect example of how a breakout should work is XXIA. While the pattern is far from perfect as we can find many flaws the last two days is how we expect stocks to act after running. It is not unwise to take some gains off the table after the monster run. It too has triggered the holding rule of running more than 20% in less than 3 weeks. A strong stock with earnings set to be released on 2/6/13. This uptrend just doesn’t want to die just yet. Look for prices to continue to move higher until we get solid sell signals.
Monday, January 14, 2013
A very quiet day as volume on the NYSE runs very light below Friday’s level. AAPL, RIMM and DELL shares supported the higher volume on the NASDAQ, but were unable to push the NASDAQ into the green. AAPL was able to close above $500, but it continues to come under selling pressure. The DELL news helped the NASDAQ and the rest of the market when it jumped above $12 a share. All in all today was a quiet day on the NYSE. The NASDAQ did see higher volume notching a day of distribution, but with DELL’s move helped remove the sting a distribution day would give. We can argue about the headwinds existing for the market, but for now the uptrend remains in play. Tomorrow we will get quite a bit of economic news to hit the market at 8:30. We have the following: Empire Manufacturing, Retail Sales, and PPI. It is anyone’s guess to how these figures will move the market, but they will likely move it. At least we can blame the Fiscal Cliff or any move the market will make. There will be a lot made of the retail figures due to the holiday season and how Black Friday may or may not have pulled sales into November rather than December. Boiling it down it is all noise and the market action is all we care about. Leading stocks acted well today for the most part. We continue to see decent action amongst the leaders. One leader LULU was hit in after-hours trading after lower revenue guidance. In after-hours trading the stock is off more than 7%. XXIA continues to act well push higher by almost 9%. The right side of this pattern didn’t have much volume, but we continue to see positive price action in the stock. We have a few other stocks we were looking at that are close to breaking out or have. You’ll have to check out our forums tonight to get the names. Action here certainly supports higher prices, but we keep on waiting to see this market push higher. Have a plan and execute the plan. Make this a great week!
Saturday, January 12, 2013
The Big Wave Trading Portfolio remains under a BUY condition across the board. This past week was further confirmation on the current strong technical condition of the overall market. While it is not perfect and we can argue about volume on the days we do rally, it is what it is and that is a strong current rally favoring all sectors and market cap size across the board. While this rally is incredibly strong right now with barely any selling able to move the market anything lower than .96% on the Nasdaq, when we do pullback, there are plenty of items out there that could be better. To start off with we hear a lot of chatter about the low VIX. While the VIX is low indeed it is still quite a bit away from the lows it was able to set in 2007 below 9. So to say it is extremely low is a bit of a stretch. However, we do realize that even though individual stocks are creating amazing patterns it sure is not like the amazing patterns we saw in 2003 when the VIX was around the 35 levels. That market had fear in it. This market is very complacent. But it is not an extreme. Also we note that cyclical stocks with dividends are doing better than growth stocks here on a Relative Strength basis. After four years of a market without a 20% pullback it is safe to say we are long in the tooth and if a final run is occurring it would historically match up with cyclical stocks leading and not growth. We can not predict when the market rally will end, and we certainly will place zero capital on that guess, but we do know that these stocks lead near the end of a long cycle. However, it is QEinfinity, the world is printing, and China is growing like mad with exports up 16% in the most recent report. Another item we hear talk of is the Investors Intelligence bull/bear survey. Currently the survey shows 51% are bulls compared to 23% that say they are bullish. That is in stark contrast to the powerful rally that started in 2003 when there were around 40% bulls and 55% bears. Once again, not a market full of fear that produces a fresh new bull market. While this is all interesting it is, once again, something you can place no capital on. It is just food for thought, in case everyone thinks that we are in for another 4 years of straight up prices. However, sadly, once again, we might, knowing the insane sociopaths that are in control of the economy and country. The one last talking point we have heard is that mutual fund inflows were the highest in 13 years right when the market topped back in March 2000. In contrast, mutual fund outflows peaked and continued leading into the 2003 rally. Once again, food for thought, but it is not actionable. Why? Simple, let’s say funds decide to put all that money to work and rally the market 25% before the top. Do you want to miss that 25% rise before “a possible” peak? Of course not. This is why all that matters right now is price. You set your buy stops and execute them when price breakouts of a trading range or a key moving average. It is that simple. You cut your losses if it does not work and you ride the trend until it ends or a trailing stop is hit. The key to this market is to not think. Just follow price. When you start running into bad luck, cut back on your trading more and more and more and more until things start working again. Once that happens, then begin to increase size. When you get the “perfect” or “best” or “most opportune” signal (as Jesse Livermore would say picking up a bag of money in the corner just sitting there) then you press. If you have not gotten that signal yet, maybe the market will consolidate and then breakout higher producing that signal. If this is going to be a real rally then we should rally into March, historically speaking. If this rally has left you behind, you still have plenty of time, if it is real. If it is not, you will be thankful you did not break your rules and chase price. In saying that, a lot of traders that missed YCS and DXJ have been waiting for a pullback. They are still waiting. Have a great weekend everyone. Aloha. Top Current Holdings – Percent Gain – Date of Signal NTE long – 121% – 8/17/12 CSU long – 61% – 9/4/12 VRNM short – 50% – 4/10/12 HEES long – 47% – 9/4/12 CAMP long – 44% – 4/26/12 ASTM short – 31% – 7/17/12 FLT long – 27% – 9/6/12 POWR long – 27% – 12/11/12 V long – 25% – 8/31/12
Thursday, January 10, 2013
Shaking off a late morning sell-off the market was able to rebound closing near the highs of the session as volume pushed higher on the NYSE, but flat on the NASDAQ. The EURO raced higher after comments from the ECB rate announcement pushing down the dollar index. AAPL was the catalyst for both moves in the morning and late afternoon as the stock continues to move sideways after its most recent decline. The NASDAQ and Small Caps hit new highs for the uptrend a good sign for the market in the short-term at least. Our uptrend continues to play out and barring any price destruction should continue on its merry way. Gold and silver rebounded today after their most recent sell-off. Despite the Federal Reserve signaling a possible end to QE forever the metals have been able to rebound somewhat. Crude oil once again moved higher while the rest of the commodity space remained relatively flat. The inflation trade in stocks and commodities still lives. Sentiment has crept back to lofty levels for the market, but not at the highs previously seen. The AAII bull sentiment figure jumped to 46.45. This past year the high for the index hit 51.64 back in February of 2012. The market was still able to rally higher and set a new high for the rally showing sentiment is not a reliable indicator for the market. Bears came in at 26.92 well above the 52 week low of 17.18 set back January of last year. Neither sentiment readings are at extremes, but we are close. The Investors Intelligence survey showed bulls back above 50% at 51%, but no near the high of 58% set earlier. Given the recent action and the lack of ultra-bullishness it appears this market has some room to run. Tomorrow we’ll get a reading on prices on imports and exports followed by the Treasury Budget announcement at 2pm. The deficit is expected to come in at -1 billion dollars. Many took income in the month of January rather than in 2013 due to the fiscal cliff. It will be interesting to see how much money the Treasury will be able to net. I’d think the estimates are off and likely sway when the debt ceiling debate would begin. We can only speculate at this point, but something to keep an eye on. As we ride into the weekend, we expect to see this market hit new highs and stand ready to act as necessary. Cut those losses.
Sunday, January 06, 2013
The Big Wave Trading Model returned to a BUY signal across the board, following the resolve of the Fiscal Cliff. The gap up was powerful and very strong. The strength was broad, volume was well above average, and breakouts were everywhere. On top of that, the price action on Thursday and Friday has been tight and many stocks that did not breakout on Wednesday broke out on Thursday and Friday. While we were only 25% long, holding about 74% cash, the positions we were long did very well and we are happy with those positions. However, being under-invested before a big move is always disappointing. The good news is that plenty of stocks are building very sound to excellent bases and if this rally has legs we should continue to see leading stocks breakout over the next few weeks. The important line in the sand to watch is the gap higher. We want to see the gap hold here. If stocks pullback we will be more than happy as that will allow more and more bases to be built in leading stocks. Subsequent rallies would make excellent areas to add to our current positions. Despite the bullish price action, it still is not an easy market for trend following stock pickers that make EOD decisions. The gap up and down nature of the market makes it difficult to get good fills and the previous fake moves of 2011 and 2012 still haunt the market today. The best remedy for this is to either be a slave to your computer screen from 930am EST to 400pm EST or to set buy stops at key pivot points in stocks that you want to get long. These stops ensure you get long as soon as the stock breaks out. In today’s market if you don’t get a breakout right when it breaks out you run the risk of missing the move as they are coming in one day more often than they ever have in my short 15+ years of investing. It will be key for stocks this week to hold the gap higher. If the gap higher fails that more than likely means that we can expect more chop. However, I would not expect this to happen. Too many leading stocks are breaking out and some leading stocks have gone straight up off the recent November lows. This is a sign of a healthy uptrend. While we would rather have seen this explosive move off the November lows to give us the best entries in individual stocks, it is what it is. The Shanghai Composite was your leading index and clue that something was afoot. Its powerful start came on December 5th and its extremely powerful follow-through on December 14th. If you take a look at that index, that is exactly what you want to see. It is a near mirror image of the start of the March 2003 bull market. These two charts (the 2003 Nasdaq bottom and 2012 Shanghai Composite) bottoms should be studied voraciously as that is what perfect stock market bottoms after a long downtrend look like. Simply beautiful. Aloha and have a wonderful and profitable week! Top Current Holdings – Percent Return – Date of Purchase NTE long – 113% – 8/17/12 CSU long – 58% – 9/4/12 VRNM short – 57% – 4/10/12 CAMP long – 54% – 4/26/12 HEES long – 43% – 9/4/12 POWR long – 31% – 12/11/12 ASTM short – 28% – 7/17/12
Saturday, January 05, 2013
The market was able to shake off a disappointing jobs figure on Friday morning failing to print 200,000 jobs. AAPL was another loser on the day slipping more than 2% weighing down the NASDAQ while the S&P lead by banks and energy was able to push higher. Banks continue to do well with the Federal Reserve buying their mortgage portfolios. For the week it was a monster move for stocks and a monster fall for the VIX. This market does not have any fear and traders are positioned for this market to continue to push higher. Small caps continue to dominate hitting new highs and until banks and small caps turn there is not a reason for this market not to push higher. It was a stellar week for plenty of stocks and there appears to be more gains had. However, since the 11/16 move off the lows (when we were close, but not close to a fiscal cliff deal) we have come a long ways. This is not to say we can’t continue to march along, but there are some things saying this market needs to digest some gains. The number of stocks above their 20 day and 50 day moving averages at least suggest a shorter term pull back. However, the number of stocks above their 200 day says something different. Price will dictate our actions, but it is always prudent to be on your toes. The VIX has been decimated with fear fleeing the market. VIX is simply an indicator of market position via options. At this point in time the VIX is simply telling us traders are positioned for an upside move. Albeit a crowded trade at this point, but big bets are being made for an upside move after the fiscal cliff deal. Unfortunately for the market crowded trades can work well in the short-term, but not so over the long haul. Short-term this market appears to have legs and will look for it to move higher. Another debt ceiling showdown coupled with warnings from Rating Agencies of a possible downgrade will be another treat dealt to us by DC. We would not be in this mess if DC only spent what it took in. Make it a great weekend!