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.

Volume Jumps as Leading Stocks Slump

A big distribution day strikes the market, but the real story is how leading stocks fared in today’s session. While we can focus on INTC, AA, or CSCO the real story is how leading stocks acted today and what they are foreshadowing. Distribution days happen in uptrends and are quite normal. However, today’s action in leading stocks foreshadows a very bleak picture for the market ahead. While AAPL price wise held up okay volume was much higher suggesting sellers are winning the battle. Our major market averages are above their respective 50 day moving averages, but it does not appear underneath it all things are looking good. One major leading stock happens to be QCOR and today’s reversal after yesterday’s big point gain smells quite FISHY! Other leading stocks like ISRG, PCLN, FOSL, CMG, and LULU are breaking down and are not playing nice in the sandbox. This action usually spells out trouble for the market even though our distribution day count is low. It is never a good sign when your leading stocks get pounded and is often a sign for more trouble ahead. Tomorrow will be an interesting day in an option expiry week. We get the FOMC meeting minutes from the most recent Federal Reserve Open Market Committee meeting. I am sure the market will be itching to see if the Fed talked about further bond buying or what we like to call MONEY PRINTING. Quantitative easing or money printing or monetizing debt which ever you prefer is something the market has been hoping on. We’ll see if the Fed talked anything about more bond buying. At this point, what else will it do other than monetize our debt and make us become more like Japan? For now, this is all speculation and the action we are seeing is quite negative for the market. There are many headwinds facing this market and many of them are known. However, what the media calls “headline risk” is simply a non-factor for trend followers. We follow price not what Mandy says on CNBC is breaking news. Cut those losses.

AAPL Keeps the NASDAQ Afloat as the Market Aways Earnings Season

Coming off a holiday week stocks ended slightly in the red with volume coming in higher across the board. The Dow Jones industrial average along with the NYSE composite both notched distribution days, but the NASDAQ and S&P 500 skirted distribution. AAPL was certainly a star of the session despite volume coming in lower for the stock. Today’s action comes as no surprise to us as many market participants were coming back from vacation. The market clearly is waiting on earnings and first up to bat is Alcoa. We are still in a weak buy signal and we’ll continue to act accordingly until the market tells us otherwise. It is nice not having the troubles in Europe dominate the talk on the air waves. Well, there was some talk, but not the pounding on the table many have been doing nowadays. Attention is now being drawn towards earning season and it will be interesting to see how the market reacts to the many companies reporting on their earnings. NKE and F are two examples of where the global slowdown is clearly hurting them on the top and bottom lines. We’ll sit back and where we need to take action we will and will not be guessing on the direction of stocks will take prior to earnings. We follow trends and certainly do not guess where they may happen next. Alcoa reported better than expected earnings and revenues after the market close. It reaffirmed its guidance for demand, but has yet to express any global growth. The stock was up more than a percent after releasing earnings, but now is hardly above where it closed. AA is not typically a name we’d like to get after since it isn’t a growth stock, but from an economic stand point it is a barometer. The lack of oomph in the after-hours session is quite puzzling and while we aren’t going to act upon it we can certainly ascertain something isn’t quite right. Earnings season has officially begun and let the games begin! A few leaders held their ground while another was unable to hold a key moving average. Both V and MA traded down to their 50 day moving average. Finding support, both stocks were able to hang above their respective 50 day moving average. On the other hand, LNKD was unable to hold its 50 day average. While volume was not above the average volume, it was the most volume seen by the stock since the day the Russell indexes rebalanced. The stock has been climbing on tepid volume and today’s action doesn’t bode well for the stock going forward. Remember to know where you are going to sell out of a position! Cutting your losses is your number one priority. Profits take care of themselves, but losses never do.

Stocks Fall Hard on European Fears; AA Jumps in After-Hours

European fears helped send stocks lower as Spain and Italy fears continue to gain traction. The big deal with Spain and Italy is simply the size of their economies and it is the size striking fear in the market. Sellers dominated the entire session as volume sky rocketed in panic like fashion. VIX jumped to its highest level since early March. Not a good day for those who were long the market as there isn’t much to point to as a positive. The lone positive was in after-hours as Alcoa posts better than expected earnings and the stock jumping more than 5%. A very bearish day for the markets as the Big Wave Trading model goes into Sell Mode.

The difficulty here will be whether or not the market will continue to sell off here. If it does look out below as it could get really nasty. However, there is enough evidence we’ll see a bounce we can short into. As of today’s close the McClellan Oscillator was sitting at -377 a very extreme level. We can certainly see the market get even more oversold, but with today’s reading it is hard to believe we’ll fall much further.

Leading stocks didn’t have much support today either, but given the size of the selling no one escaped. There are many reasons for the market to sell-off, but we know it is better to act rather than trying to figure out the reasoning. Sure, Europe is a great reason for the sell-off and Spain and/or Italy’s failure would bring on some pain. But, this market has gone straight up on the back of AAPL, CMG, and PCLN. A correction here is not out of the question it is unfortunate volume kicked into hyper gear today.

Earnings season was kicked off by Alcoa during the after-hours session. The stock posted better than expected earnings and the market responded by sending the stock higher by 5%. Many will view Alcoa as the unofficial barometer for the first quarter earnings season. It will be fun to watch the entire earnings season unfold.

Cut your losses short.

Markets Close in the Red After a Disappointing March Jobs Report

The March jobs report released on Friday was quite disappointing as just over 100,000 jobs were created. A record number of people leaving the labor force helped unemployment drop to 8.2%. Futures indicated the market wasn’t about to respond well to a poor jobs report and today’s market certainly indicated weakness. The lone positive on the day was a few leading stocks finished in the green and in the short-term we are oversold. Big Wave Trading’s market model remains in neutral mode while this market is in correction.

Only 23% of stocks remain above their 20 day moving average and 40% above their 50 day moving average. These numbers are showing the market is quite oversold at these levels and the market is due for a bounce. The last time the market saw these figures was back in early March as well as the week of Thanksgiving. While there is no guarantee we will see this market rebound to new highs we can be certain some sort of bounce may occur. Piling onto the oversold bandwagon the McClellan Oscillator now stands at -287. An extreme oversold reading giving credence to a possible market rebound ahead of earnings season.

Earnings season is upon us and AA is set to report earnings after tomorrow’s bell. Every quarter we get to experience the blow-ups and melt-ups. This earnings season should be no different! If you are carrying a sizeable position in a stock it is wise to lighten up ahead of earnings. While you may miss out on some gains you’ll miss out on some big time blow ups. Pre-announcements are unavoidable like PMTC even though it failed a pocket pivot. You can avoid stocks blowing up by simply reducing the size of your position ahead of earnings.

Trend followers do not need to worry about earnings season, simply following the trend and a sell discipline will reap huge rewards. Forget opinions, they are simply guesses and do not give you an edge in the market. Enjoy earnings season and remember to cut your losses short.