BAC and YHOO Soar as Stocks get back on the Winning Track

Poor housing data kicked off the morning with Mortgage Applications falling along side Housing Starts and Building Permits. However, the data wouldn’t keep stocks from ending positive as Bernanke’s testimony and continued to press the Fed would remain accommodative as long as possible. Gold and silver didn’t buy the Fed’s Chairman Statement as both precious metals turned lower. YHOO shined after its earnings report Tuesday night. BAC jumped as well after reporting earnings earlier in the day. Volume was mixed, but NYSE volume can be attributed to the huge turnover in BAC. Tomorrow is a new day and the evidence we see continues to have us operate on the long side of the market and there is no sense in fighting it. EBAY and INTC reported earnings and the reaction is disappointing so far. EBAY is nearly down 5% after guiding EPS lower for the third quarter. INTC missed on revenues and while it is not trading down 5% it is in the red. On the upside IBM reported earnings and the stock’s reaction is quite positive. The stock is hanging above 200 price level. It will be interesting to see if the stock can hang above this level at tomorrow’s open. SCSS reaction after earnings was disappointing and the stock is down more than 8%. Quite the moves here in after-hours trading making tomorrow’s open very interesting. A quick note on sentiment from the II survey as bulls jumped above 50% while bears went under 20%. Last week we saw a similar spread between AAII Bulls and bears. We’ll post these numbers in tomorrow’s commentary. Sentiment is a tough gauge for market tops as they often hit extremes as the market continues to hit new highs. It does appear we are nearing an extreme point. An area of cautionary tone is the amount of stocks above their respective moving averages. At today’s close nearly 87% of stocks were above their 20 day moving average. 75% of stocks were above their 50 day while 79% of stocks were above their 200 day moving average. We are certainly at a point where a normal correction would occur. Will it occur tomorrow? It is anyone’s guess, but it’s a friendly reminder to make sure you stick to your game plan. Ben Bernanke is keen on keeping the market away from hearing taper talk. Will the Fed chairman simply just announce the taper out of the blue? Who knows, but at this point it seems likely as any mumbling of a taper sends traders scrambling. Cut those losses and ride your winners.

Last Half-Hour Sell-Off Trims Day’s Gains

Slightly disappointing economic numbers failed to trip up the market at the open. GDP came in slightly below expectations and jobless claims were disappointing. Volume rose on the NASDAQ by a hair and dropped over on the NYSE. Plenty of stocks are holding up including the banks lead by big moves from BAC and MS. The last half hour of the session was not desirable for stock bulls. Over the past few sessions sellers have been dominating trade push stocks lower at the close. This may turn out to be nothing, but it is something to keep an eye on. Not a terrible day for the markets, but one that could have been much better. Sentiment indicators continue to be off extreme levels with the exception of the II survey. Even though the survey respondents for the II survey were less bullish they still remain historically high. Bears remain below 20% and have stayed around 20% for quite some time. However, the AAII survey showed a bigger drop in bulls closing the week at 36% while bears are at 30%. NAAIM survey showed managers were bullish, but less bullish than the week prior. Sentiment certainly isn’t screaming a top signal, but the bullishness on CNBC remains very high. Price action still favorable for the longs and this is what we want to see. Tomorrow’s end of the month trading will see volume spike at the close of the session. It will be interesting to see how the volume run rate will be prior to the final hour of trading. There are plenty of stocks holding up exceptionally well in this market. They are certainly signaling this market has more room to run to the upside. This is not a guarantee we go higher, but certainly we have signs we can go higher. On a longer time frame we do remain in an overbought condition. We can remain here for quite some time and with short-term indicators like the McClellan oscillator showing oversold conditions a bounce here into new highs wouldn’t surprise us. If we do fail here we can cut our losses and go with the flow. Cut your losses short and ride your winners.

Turnaround Tuesday Sends Stocks Higher as Trading Volume Jumps

The Dow closed higher on Tuesday for the 18th straight week moving higher by more than 100 points. Leading the market higher was the Russell 2000 jumping more than 1.25%. S&P 500 gained more than 1% while the NASDAQ lagged finishing higher by .69%. Surprisingly the VIX jumped more than 1.75% outpacing the S&P 500. Is a big point move coming? AAPL was hit hard during the trading session sending the NASDAQ lower and ultimately keeping the NASDAQ from bigger gains. Despite the AAPL sell off the NASDAQ found support along with the rest of the market pushing up into the highs of the session. Another bullish session for the market reminding those who are fighting the trend is very dangerous. Financials were a hot sector today led by BAC, GS, and JPM. These stocks have been lagging the general market since March. A positive sign for this uptrend would be to have financials participate. GS breakout is solid with volume following price something we haven’t seen very much from this market. Many will look to find the catalyst for the moves, but in the end does it really matter? No, all that matters is that you take the signal and ride the move higher. Volume pushed higher today and it was above average. We haven’t seen volume on new highs in quite some time and above average to boot. Low volume new highs have been a staple for this market and today was just a break from the norm. We don’t have any evidence today is a top in the market and given what we saw from Financials today we should continue to push higher. We can think of plenty of reasons for volume like we are beginning to see panic buying. However, until we see real signs of a market top we aren’t going to begin fishing for reasons. One thing that will be interesting to watch will be JGB – Japanese Government Bonds and how their yields move over the course of the summer. The US 10 year treasury has moved roughly 30 basis points from their lows. A big move in yields will have adverse effects on debt servicing costs. Something to keep an eye on as time moves forward. Rising yields are not good for those who have a heavy debt load. Until this trend ends we are going to stick with it.

NASDAQ and S&P 500 Extend Friday’s Gains

There wasn’t much fanfare in today’s market without any US economic data. In fact, this week will be quite a bore for those who thrive on economic data. AAPL gained more than two percent as the stock has moved off multi-year lows. BAC vaulted 5% on very strong volume has the stock has moved higher from its most recent consolidation. Volume will be ignored until we see a parabolic run in this Federal Reserve highly accommodative environment. The trend is up and it is very difficult to fight this trend. It is nice to see gains were followed through on this time around. Perhaps we are seeing the beginning of a parabolic run or the top for the moment. In the end, we cannot predict the future nor can anyone else. At the moment we have a trend that simply will not quit and we aren’t going to fight this trend tooth and nail for a top. Opinions are often wrong and are very costly and it is best to focus in on price than another input. Stick with the trend. Another “nice” thing we saw today was individual leading stocks breaking out. A few names have potential ending up as new longs for tomorrow morning. Big Wave Trading members will be getting a treat for tomorrow. If you aren’t a member what are you waiting for? Go here to sign up http://bigwavetrading.com/register/. It is vital we have a breadth of stocks breaking out for this market to be able to sustain this uptrend. Get on this Big Wave! Last Friday’s job report was viewed a positive with upward revisions and the headline number not as bad as everyone had predicted it to be. The labor force held steady at 1979 levels while unemployment dropped to 7.5%. Average Hours worked may provide a glimpse into how Obamacare (aka the Affordable Care Act) has pushed many companies to hire more workers but cutting their staff’s hours. How this all works out is anyone’s guess, but having more workers working fewer hours doesn’t feel like a recipe for success. A good start for those who are long the market and tomorrow we’ll see if the Dow can close positive for the 18th straight Tuesday. Cut those losses and ride your winners.

Volume Jumps and Stocks Fall Ending the Market’s Uptrend

The NASDAQ Composite loses its 50 day moving average on heavy volume. AAPL and GOOG lead the NASDAQ 100 lower as the big cap technology closed down 1.99%. Commodities followed stocks lower with copper and other metals leading the charge lower. The Federal Reserve’s Beige book showed moderate growth due to autos and housing but did very little to lift the market further off its lows. Blue chips continued their outperformance with help from JNJ and HD. The action as of late is certainly along with volume has thrown our uptrend out the window. We will act accordingly to our rules. Economic news has not been good across the globe and up until this week the market has ignored them. This morning BAC released disappointing results and CSX CEO stated this economy would only grow 1-2%. Two percent growth is simply not good enough and anything less than 2% would cause big impacts. Many estimates from the public to private sector are counting on growth to solve our problems. If growth doesn’t show up it will cause significant impacts to bottom lines. Earnings will continue to pour in and while there was quite a bit of optimism heading into this earnings season it is how the market reacts is what is important to us. We do not pretend to even think we could predict the future like many pundits on CNBC and Bloomberg. Our focus is on our trend following process to set ourselves apart and obtain superior performance. Focus on price action and using our rules to know when to get in and out is how we drive superior results. Tomorrow we’ll get our weekly look at Jobless claims. It is anyone’s guess how the number will turn out, but it is sure to get a good rant out of Rick Santelli! Who doesn’t love a good rant every once in a while. Perhaps we have our correction that every bear has been calling for at our doorstep. We simply won’t know until it is over. Stick with Big Wave Trading and we’ll get you to a higher level of trading. Cut those losses and ride your winners.

Volume Disappears as Stocks Recoup Majority of Monday Losses

In fine QE fashion stocks rebound in very light trade. Positive housing data did help the market even though growth came from multi-family homes. Industrial production grew at a faster pace than expected. Today was the first time we had economic data come in better than expected. Sellers disappeared paving the way for the market to float higher throughout the day. Volume disappeared falling more than 20% on the NYSE and 15% on the NASDAQ falling right in line with QE trading. Our uptrend remains in place for now and we remain ever confident in our systematic approach. Gold and silver rebounded as well as many other commodities after Monday’s big decline. The decline in gold was a 7 sigma move! Either metal was unable to capture majority of losses like the Dow Jones, S&P 500, and NASDAQ. I for one would love to see commodities in general move lower. Lower prices of things we need like food and energy can only help those who don’t own assets benefiting from the Fed’s ZIRP and QE. Lower prices for commodities continue to be highly probable and who can’t smile at lower prices at the pump? Earnings after the bell failed to inspire buyers. INTC closed the after-hours session higher by .71%. However, INTC was up more than 3% after reporting earnings. YHOO pushed higher initially after reporting earnings but the stock fell 4% by the end of the after-hours session. CRUS released earnings disappointing the street finishing lower by almost 11%. We’ll see what tomorrow brings for these stocks and the rest of the market. Tomorrow we’ll get the release of the Federal Reserve’s Beige book. There are few speeches tomorrow by Fed members and likely get a few headlines. Outside of the Beige book it is a relatively quiet day in terms of economic news. Before the market open we’ll get earnings from BAC and we’ll see if the stock follows C or GS. BAC has been a leader in this rally and has been an important piece to this rally. If this market can build upon today’s gains it will bode well to recoup all of Monday’s losses. Of course, we’ll follow our strategy and follow price. Cut those losses.

Dow and S&P 500 End Higher for the Fourth Consecutive Day

A positive reading from the ADP employment survey helped fuel stocks early pushing the Dow further into all-time high territory. BAC helped push the Dow as the stock aims to hit new highs on strong volume. By mid-day the markets were off their highs awaiting the Federal Reserve’s Beige book. The Federal Reserve noted growth in the economy due to gains in housing. Initially pushing stocks off their lows it appeared the Beige Book would send the stocks into new highs on the day. The rally would stall out just after 3pm. A late day small push off the lows by the bulls kept the major indexes from closing on their lows. It was good to see the market avoid distribution just after hitting new highs. GOOG and AAPL were drags on the NASDAQ today. AAPL continues to act poorly while GOOG pulls back after two big sessions. Both companies are fighting over the smart phone universe and both stocks are heading in different directions. A key point in both stocks is their relative strength. Focus on stocks with high relative strength and in the case of GOOG and AAPL is demonstrates the importance of relative strength. A few IPOs continue to act well. Our Platinum members were alerted to EOPN Monday morning to its potential. When IPOs act well you can bet the market is healthy. We’d love to see stocks like EOPN and EVER continue their moves higher. There is a lot of chatter about how far this market rally can go. Does it really matter where it ends when you focus on your exits? Sure, we’d love for this uptrend to never end and we go up every day. However, we know this is simply will not occur. No one knows how far or how long this will last. Therefore, we must have exits we know maximize our potential to take the maximum gain possible from the market. Otherwise, we’ll be leaving gains on the table and we strong dislike leaving gains on the table. Stick to your game plan. Let your winners fly and cut those losses.

Stocks Rebound but Volume Falls

Positive economic data fails to lift stocks initially as the market focuses on Bernanke’s testimony. Europe continued to succumb to the Italian problem. Volatility dropped after jumping 34% yesterday, but despite the market rebounding volume did not follow. Monday’s have been low volume sessions for much of this year with Tuesday’s showing big volume. Today’s lack of volume shows institutions weren’t too keen on jumping back in the market. Late day buying helped push the market to the highs of the session. We remain in neutral mode and we do have a change in a short-term trend with one of our ETFs. The market now will have to digest more economic news with Durable Goods and GDP coming Wednesday and Thursday. Friday we’ll likely see the US go over the Sequester hurdle. We’ll be focused on the overall market action. At the moment we are seeing a lot of distribution in the market without much accumulation. Looking back to September of last year we didn’t see this level of distribution like we are seeing now. Perhaps there is something more sinister happening, but we’ll wait for our signals before we act. We are still a bit oversold in the near-term so another bounce from the market is not out of the question. Stay ready and execute your game plan. We do have few pockets of strength, but it is so few and far between it is nothing to get excited about. FLT continues to be a big winner, but many leading stocks look bad. BAC has been a leading stock despite its pitiful earnings growth. Remember, BAC has been goosing its earnings using its loan loss reserves. GS remains above its 50 day, but the last few selling days have left a big blemish. Homebuilders certainly got some love today, but remain below a key moving average. These stocks will need to rebound to give this market any chance of rebounding. Stick to your signals and ignore the nonsense spewing from CNBC. Short-term trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/26/2013 150.02 0.68% IWM UPTREND NO CHANGE 2/26/2013 89.37 0.39% QQQ DOWNTREND CHANGE 2/26/2013 66.56 0.38% USO DOWNTREND NO CHANGE 2/26/2013 33.33 0.36% UNG DOWNTREND NO CHANGE 2/26/2013 18.98 -0.52% GLD DOWNTREND NO CHANGE 2/26/2013 156.22 1.22% SLV DOWNTREND NO CHANGE 2/26/2013 28.41 1.21% DBC DOWNTREND NO CHANGE 2/26/2013 27.42 -0.18% FXY UPTREND CHANGE 2/26/2013 106.55 -0.75% FXE DOWNTREND NO CHANGE 2/26/2013 129.57 0.02% TLT UPTREND NO CHANGE 2/26/2013 119.33 -0.58%

NASDAQ Lags as S&P 500 Ends Flat as Volume Slides; European Woes continue

Overnight the Nikkei jumped 3.8% as the country remains hell bent on trashing their currency. Europe resumed moving lower as the DAX fell more than 80 points. On this side of the pond futures were lower on the moves in Europe. Just before lunch time rumors of a special dividend helped send the stock higher dragging the NASDAQ along with it. Just after noon time fortunes for the market reversed and the market headed back to the lows of the session. It appeared as if sellers were going to rule the day. At the close, buyers were able to get the market back to breakeven. Our uptrend remains. Tomorrow we’ll get a rate announcement from the ECB followed by Draghi’s press conference. The EURUSD has been on a tear as of late as the US and Japan intend to print their respective currencies to oblivion. At this point the ECB can only cut rates as it cannot monetize debt. Draghi’s comments has moved the markets before and tomorrow shouldn’t be any different from the past. Which direction shall the market respond is anyone’s guess, but given our current uptrend we are going in long. There is some bright spots out there including DDD and SSYS. Banks continue to act well lead by BAC, GS, JPM, and one of our new longs for tonight. The action in EXPE left a bit to be desired and it appears more and more stocks reacting to earnings aren’t able to hold their breakouts. AMZN is one while having a rich PE has been performing well until the most recent earnings report. Another blemish is the two leading stock indexes we follow remain underperforming the overall market. This can change in a hurry, but we are keeping an eye on our leaders. Tomorrow morning will hold some fireworks and we are looking forward to seeing how our stocks react. Cut those losses short. Short-term trends: TICKER ST TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/6/2013 151.16 0.07% IWM UPTREND NO CHANGE 2/6/2013 90.46 0.42% QQQ UPTREND CHANGE 2/6/2013 67.24 -0.33% USO UPTREND NO CHANGE 2/6/2013 35.04 0.03% UNG DOWNTREND NO CHANGE 2/6/2013 19.36 0.94% GLD DOWNTREND NO CHANGE 2/6/2013 162.39 0.27% SLV UPTREND NO CHANGE 2/6/2013 30.81 0.16% DBC UPTREND NO CHANGE 2/6/2013 28.55 -0.14% FXY DOWNTREND NO CHANGE 2/6/2013 104.85 0.07% FXE UPTREND NO CHANGE 2/6/2013 134.13 -0.41% TLT DOWNTREND NO CHANGE 2/6/2013 115.98 0.82% QQQ changed back to an uptrend. This is due to the short-term nature of signals generating more signals.

AAPL rebounds while the Dow breaks Winning Streak

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.

GDP Prints above 3% as Stocks Trade in Tight Daily Range

In a surprise event 3rd quarter GDP printed above 3% above expectations. Unfortunately, the surprise to the upside failed to induce a strong response from the stock market. Initial jobless claims rose to 361,000 for the week a bit higher than expected. But, dominating the headlines was John Boehner’s plan B for the Fiscal Cliff. Volume ran lower throughout the day suggesting institutions were taking a break. Leading stocks help up relatively well while ISRG and HLF continued their declines. Financials and in particular BAC continued to march higher with Small Caps continuing their run. At the close, stocks closed near the highs of the day finishing much better than Wednesday session. Our uptrend remains intact and we’ll see how stocks react to tomorrow’s quadruple witching. News hit John Boehner pulled the vote on his Plan B sent futures MUCH lower. The Emini-S&P 500 futures dropped more than 2% in 2 seconds. The only way this occurs is with computers fighting one another. The low print was 1391 nearly a 50 point decline in the S&P 500. We aren’t about to react to the moves in after-hours session and we’ll see how we open/finish tomorrow. If we move lower and hit our exits we’ll gladly do so. For now, we’ll remain with our positions and react as our rules say we should react. There are positives in this market with small cap stocks leading the market higher. Barring a disaster tomorrow this uptrend should continue to move higher. We do have plenty of bulls in the market with the AAII Survey showing more than 46% of its respondents say they are bullish. Only 24% responded as being bearish over the next 6 months. While the percentage of bulls is not at highs it is nearing frothy levels. Remember, sentiment is far from a perfect indicator for the market. However, for the fourth straight week we have the number of bulls above 40%. Tomorrow will be fun with options in four different markets expire. Volume should soar tomorrow skewing our volume data. Price action will be pivotal given the reaction to the cancelling of the Plan B vote. There is no need to have guess work here. Stick to your plan and execute with precision. Have a great weekend and despite what many are predicting for 12/21/2012 we’ll see you next week.

AAPL Suffers as C and BAC Enjoy Big Moves

A wild day on Wall Street as stocks stage an intraday reversal only to give back gains at the close. Once again the market was ready to fall apart and we were able to find buyers at the lows. AAPL tumbled hard while BAC and C raced higher. The market liked these two gigantic banks were cutting costs by eliminating jobs. Volume rose across the board giving the NASDAQ a day of distribution and stall days for the S&P 500. At one point it appeared the Dow would put in a follow-through day (and NASDAQ a distribution day), but ended the day in stalling action. We are still without a confirmed uptrend and wild intraday action. In addition, we still have failing breakouts. Adding all of this up cash is very much king. All eyes will be on the ECB tomorrow morning. Since the last ECB meeting the economic landscape in Europe has not improved, but worsen. Expectations is for the central bank to leave rates steady as borrowing costs across the continent have dramatically been reduced. More importantly, it will be how the market reacts to the central banks comments. Given the movement off the recent lows the European stock markets are expecting the central bank to produce something for them to continue their trend. After the ECB announcement we’ll get initial jobless claims and a look into Friday’s job report. Let the fun begin from CNBC and their over-analyzing the data and blaming Sandy. Market action is where our attention will be focused. There is something sinister going on with AAPL. Perhaps the rumor of a dramatic reduction in demand or some fund was forced to dump was the cause of the sell-off. To be honest, we do not care the reason for the decline and what we know was today the stock sold off in heavy volume. The stock’s trend is down and it appears there isn’t much that will stop this stock from taking out the November 16th lows. AAPL is a beloved stock and owned by many institutions and if the selling continues the exits will become very crowded. Do not be a hero. The NASDAQ remains below its 200 day and 50 day with the S&P 500 continuing to find resistance at its 50 day moving average. Until we see these indexes move above these moving averages with conviction and without a follow-through day the long side is not safe. Cash is king and we continue to tread very carefully in this market.

NASDAQ Jumps off its 200 Day Moving Average in Increased Trade

Day three of the NASDAQ’s most recent attempted rally ended on a solid note with the index gaining 1.44% on increased trade. Big Wave Trading’s model has moved into neutral territory as we did see the market make solid gains. Traders in QQQs and SPYs didn’t overwhelming support the move as the ETFs showed volume come in lower. However, volume in the ETFs hasn’t mattered in determining a new market rally and today did not diverge. Banks lead by BAC continue to act well in this market and continue to get support from the Fed. Diverging from the market rally were Gold and Silver closing the day lower. Tomorrow’s job report is the highlight of the week and surely be a big focus for market pundits. The NASDAQ put in an impressive move today. Suffering on the day was the VIX or fear index. Even during the decline fear never picked up to the point where you would say investors aren’t fearing any decline in the market. Volatility ETFs were once again slammed and continue to show themselves as a very difficult trading vehicle. But, now the market will have to deal with the jobs report tomorrow and election on Tuesday. In the after-hours session plenty of stocks are moving higher. MELI and FSLR weren’t as fortunate as PCLN, LNKD, FOSL, and SBUX. Many of these stocks have been beaten up since the summer time. LNKD continues to trade higher despite sporting a PE near 200! Remember, CSCO in the 90s had an astronomically high PE and was a huge winner. PE only matters on the way down and not when the stock is moving higher. Remember, price will dictate your actions not where the PE trades. Many growth stocks are given high PE ratios by traders. It is when supply and demand deteriorates to a point where the stocks falls hard. It is only then when the PE was too high. We’ll see what tomorrow brings for these stocks, but they are performing well in the after-hours session. We are no longer in oversold territory after today’s move. We are back to neutral in our model and will await a confirmation day. Friday represent day 4 of an attempted rally for the market. Remember, cut your losses. CORRECTION: WE REMAIN UNDER A HARD SELL SIGNAL ON THE DJIA/SP500 BUT ARE NEUTRAL ON THE NASDAQ, RUSSELL 2000, AND NYSE. OVERALL, WE ARE NEUTRAL, WITH A TINY HEDGE REMAINING IN THE SPY/DIA. WE WILL DELETE THIS SMALL REMAINING HEDGE IF WE SUBSEQUENTLY CLOSE HIGHER ON FRIDAY.

Big Wave Trading Portfolio Update And Top Current Holdings

THE COLUMN BELOW WAS A PREMIUM MEMBERSHIP COLUMN PUBLISHED ON FRIDAY FOR BIG WAVE TRADING MEMBERS. ANALYSIS SPECIFIC TO TRADING POSITIONS HAS BEEN REMOVED. Happy anniversary of the October 19, 1987 crash everyone!! Well, well, well. It sure was an interesting day to say the least. Today’s option expiration was nothing short of exciting as stocks sold off on heavy above-average higher-than-the-day-before volume. Stocks and stock indexes didn’t just sell off, they cratered. The weakness in the Nasdaq and Russell 2000 finally spread over today into the SP 500 and DJIA thrusting all four major indexes into a SELL signal on our market trending model. The Nasdaq and Russell 2000 were currently under a NEUTRAL signal and the SP 500 and DJIA were under a BUY signal but today’s sell off was confirmed everyone thus switching everything into a SELL. It doesn’t matter where you look. The indexes, futures, the options chain, ETFs, or inverse ETFs. Wherever you look, volume exploded higher. What didn’t explode higher but finally moved was VIX. VIX has finally begun moving in the direction those of us at Big Wave Trading believed it should have started moving in on 9/25. While the move came on convincing volume, and the CBOE reported the highest weekly trading volume ever in VIX futures, a BUY signal was not triggered in VXX/UVXY/TVIX. [MEMBERS CONTENT ONLY]. [MEMBERS CONTENT ONLY]. Getting back to the overall market, it was the fifth time this year that the Nasdaq has closed lower for the week on above average 50-week volume. As just mentioned, this now makes it five times that this has happened versus 0 times the Nasdaq has closed higher on above average 50-week volume. 5 – 0. For the year, the NYSE is actually up 1 vs. 0 times down. But the NYSE is not where you find your dynamic exciting technology based growth stocks. Those are found on the Nasdaq and Russell 2000. When you consider the volume pattern of the Nasdaq and then take a look at the recent slope of the Relative Strength line of the Nasdaq and Russell 2000 compared to the SP 500 you can see that we have a potential problem brewing here. The Relative Strength line of the Nasdaq is simply imploding here nearing the December 2011 levels. Meanwhile, price is nowhere near those lows. If this trend continues, watch out! The Nasdaq and Russell 2000, in healthy uptrends, lead the market. The Nasdaq and Russell 2000 start to lag the NYSE when a rally is on its last legs. The Nasdaq and Russell 2000 lead the market down when a downtrend is starting in the stock market. What stage are we in now? You are correct. This obviously means that now is the time to be cautious. This is especially the case when you look at the recent action in AAPL, GOOG, AMZN, PCLN, and LULU. After taking a look at those, take a look at the big giant bellweathers like IBM, INTC, MSFT, SBUX, MCD, and GE. Notice the same bearish action? Then take a look at your leading biotech stocks like ALXN, BIIB, VRTX, and PCYC. Is there anything surviving? Of course. The bank stocks like GS, BAC, and JPM are acting like there is nothing wrong and of course for the master criminals that run these banks and the USA there is not. On top of that, they need to make sure real estate prices go up so that all their real estate holdings continue to make them wealthier and wealthier (If these sociopaths CREATED their own businesses this would not be a problem. They didn’t.) on the backs of the middle class. On that note the XHB is fine. HOV, TOL, PHM, BZH, MTH, MHO, LEN, KBH, etc. all look like they were completely oblivious to the carnage gripping the market today. If you see the big banks (KBE) and home builders (XHB) start to roll over, then you can be sure this uptrend is finished. To me, it already is, as I follow the Nasdaq/Russell 2000 as market leaders. However, if these stocks continue to rally, show no damage, and we begin to find a floor to this selling, I would expect that the uptrend could definitely continue. I mean, it is a Fed based QE driven stock market. When stocks sell off, they step up to make sure their jobs are safe for now. I am sure one day this will stop working. Until then, the theme don’t fight the fed still rings loud and true. No one can predict the future in the stock market. I will not try to either. While it looks like we are about to crack wide open, we could easily find support and rally higher on no volume. Hell, we did it in 2009, we did it in 2010, we did it in 2011, and we did it earlier this year in 2012. Why not a fifth time? [MEMBERS CONTENT ONLY]. [MEMBERS CONTENT ONLY]. It looks ugly but it has looked ugly before. Let’s see what happens next week. Have a great weekend everyone. Aloha. [MEMBERS CONTENT ONLY]. Top Current Holdings – Percent Gain – Date of Signal AVD long – 139% – 1/10/12 NTE long – 62% – 8/17/12 CAMP long – 59% – 4/26/12 CLGX long – 52% – 6/19/12 SVNT long – 44% – 9/10/12 VRNM short – 39% – 4/10/12 CSU long – 32% – 9/4/12 MAGS short – 31% – 4/18/12 SHF long – 28% – 8/1/12 ASTM short – 26% – 7/17/12 HEB short – 25% – 9/24/12

NASDAQ Breaks Six Day Losing Streak; C Jumps more than 5% on Earnings

The market finally bounces from oversold conditions as volume ends mixed. Volume rose on the NYSE and NASDAQ exchanges, but SPY and QQQ volume remained light. Retail sales jumped more than expected helping set the tone early on. Sellers got the upper hand on the NASDAQ, but were quickly turned away as stocks zoomed higher into the close. Price gains were solid and although we did not see the overwhelming volume associated with institutions supporting the market. Today was day one of a new attempted rally on the NASDAQ lead by banks. Banks lead the market today on the back of Citbank’s earnings with the stock gaining 5.5% during the market session. WFC continues to suffer from its earnings report, but other big banks continue to act well ahead of earnings. GS, BAC, and JPM continue to act well and are poised to move higher. When the Federal Reserve will be buying mortgage securities from Banks it is hard to fathom the Federal Reserve will pay anything but the highest price possible. So far, the only group to benefit from QE Forever will be the big money center banks selling mortgage securities back to the Federal Reserve. We were bound to bounce from the selling we saw from last week. The NASDAQ was down 6 days straight and it is quite normal to see the market rebound. There is no way to know whether or not this will turn into a new uptrend or a one day wonder. We’ll need to see confirmation of a move higher before we get excited over one day’s action. We remain in neutral mode and until price action and leading stocks say anything different we’ll remain neutral. There is just 22 days left to the election is over and it cannot come soon enough. As soon as the election ends the fiscal cliff topic will be one in focus and one the market will grapple with and hopefully produce a trend. Today concluded day one of an attempted rally and we’ll be waiting for confirmation one way or another.

NASDAQ 100 Carries the Market Higher Despite Disappointing Manufacturing Data and Jobless Claims

Economic news was not good this morning, with the Philly Fed showing manufacturing contracting and jobless claims contracting much more than expected. Initially the market did sell off on the news but buyers jumped back into the market pushing the NASDAQ back to intraday highs just after noon time. Early afternoon selling, once again, was met by buyers as this market appears it just can’t go down. Regardless of the reason we continue to see support rush into the market any time sellers get a leg up. A few financials were struggling, but overall the market remains in an uptrend and we’ll continue to act accordingly. A surprise out of the AAII investor survey was it showing the number of bears jumping above 40%! Those who are bullish fell to 22% and it is surprising considering the move in stocks since JPM issued earnings. Sentiment is not something you would want to trade off of, but it is interesting where folks are at with this market. Perhaps it shows people are bearish and feel the Federal Reserve will save the market. The big boy financials certainly aren’t following up gains from earnings. MS reported this morning and the stock has been getting hammered. BAC, JPM, and GS continue to act very weak! Technology stocks are certainly in favor with EBAY, QCOR, and SNDK earnings. Last week it was JPM who got the party started with its earnings release and we have seen very little follow-through. We’ll stand pat with our rules-based investing and leave the guess work to others. Lagging the broader market in a significant way were Small Cap stocks. The Russell 2000 fell .36% today, while the NASDAQ jumped .79%. Even though the NASDAQ backed off its highs of the day, the index put in a solid day, unlike small cap stocks. It is unfortunate, but investors are just not favoring small cap stocks for whatever reason. Perhaps the Bernanke put is only dividend yielding stocks? It is anyone’s guess and for now small cap stocks as a group are not moving and we’ll latch onto the stocks that are moving. Just another day in paradise! Cut your losses and let your winners ride! Have a great weekend.

Stocks Add to Tuesday’s Gains as Volume Ends Higher

For the second straight day, Ben Bernanke testified in front of the house and stocks pushed higher. Housing data was a bit better than expected, aside from building permits. However, a few home building stocks like HOV and PHM did not agree. INTC lead the semi-conducting stocks and the rest of the technology sector higher. NASDAQ led the major indexes higher with solid gains, but off the highs of the session. We continue to be in rally mode and have witnessed a solid back to back days of gains. Despite potential headwinds facing this market and it being the summer time, we have quite the potential to run further. This might change tomorrow or Friday, but for now we are in rally mode. If we are wrong we simply use our rules to exit our positions and move forward. No guess work here and we certainly aren’t going to act upon any emotion. Know where your exits are both for losers and know when to exit your winners. Banks were looking pretty good, but earnings from BAC disappointed the market as the stock sold off in heavy trade today. GS and JPM both look weak here and after enjoying nice gains from JPM’s earnings release last Friday we have seen a lack of follow-through from many of the banks. BBCN and WTFC bank stocks we have liked continue to do well, but it is the big boys weighing on the entire sector. As we progress we’ll continue to look to see where our exits are and potential entries and go from there. We’d rather to see financials continue to lead the market as they tend to be the first group out of the gate during a rally. Where this market goes is anyone’s guess! For now we have a trend to push higher and until we get signaled otherwise it is the long side we go. Cut your losses and ride your winners.