Hope Continues for a Fiscal Deal, but Stocks Fall in Mixed Trade

Just the headline of a meeting between Boehner and Obama helped push the market off the lows. There is desperation for a deal for the fiscal cliff. The market for the second straight day rolled over from the morning highs. Despite doubling down on QE infinity stocks have been unable to crest above last week’s high. Volume on the NASDAQ rose giving the index another day of distribution while volume fell on the NYSE. Price action is not strong at the moment and given the lack of thrust from recent breakouts this uptrend we have been in is at risk for failing. Cash remains king. The fiscal cliff is such an interesting beast. On 11/16 we were close to getting a deal and yet four weeks later we are no nearer a decision than we were on 11/16. Our government spends roughly 25% of GDP by borrowing forty cents for every dollar spent. It is a nice thing to say we aren’t taxing the rich enough, but taxes only get us so far maybe 1/10th of the way. While we have been able to implement tax cuts we have never been able to cut spending. It is time to take our medicine and begin down the path of sustainability. This recent uptrend is still without a true follow-through day and even though we could get one tomorrow it isn’t likely it will produce tremendous gains. Days 3-7 are the sweet spot for a confirmation of a new uptrend. The lack of follow-through day simply underscores how weak this uptrend has been. Where are the stocks zooming out of bases? Sure we have had some breakouts, but they aren’t screaming higher like we normally see in a sustainable uptrend. As of now, we do not have the strength needed to continue this rally. This action is the main reason despite our model switching to a BUY signal two days ago that not one position was placed off of this signal. There was simply too much cross-currents and bad/confusing action. Our model has obviously returned to the NEUTRAL mode. No harm, no foul, this time around. Know your exits and if the situation changes be ready to adapt! Have a great weekend.

Stocks Fall Again as Fed Hints at More Asset Purchases Next Year

Despite CSCO and ANF gapping higher the market could not overcome selling. Once again volume jumped on the day as Institutional Investors dumped stock on the market. We did see some movement from the VIX, but the fear index remains tame under 20. Selling picked up steam as Obama stepped up to the microphone after meeting with numerous CEOs. The market clearly didn’t appreciate what he had to say nor what came from the FOMC meeting minutes. More asset purchases were discussed for next year due as if the first three easing programs worked. Our sell signals remains and has kept us on the right side of the market despite the oversold conditions. There isn’t much this market hasn’t taken to the woodshed. Homebuilders and Financials were the two groups holding up and now they are under tremendous pressure. BAC had been holding up, but it too could not hold up under the tremendous selling pressure. XLF is now just above its 200 day, but all we see is heavy volume selling. It will take some time before XLF will repair itself. XHB sliced through its 50 day today and appears to be headed to its 200 day. We may be oversold, but there isn’t much signaling a short-term bottom. We could bounce into next week, but we aren’t seeing anything ready to support a significant move higher. Perhaps we get a Grand Bargain the market likes, but what we heard from Obama this is simply a pipe dream. Given the oversold nature of the market it wouldn’t surprise us to see the market try to bounce at these levels. We do not have a crystal ball, but given what we have seen from the market and with a tame VIX it is hard to believe we have found a floor. The June bottom came when the VIX nearly hit 30, but lead to a choppy bottom before we headed higher. Until we get capitulation and a VIX jumping it is very likely we’ll continue lower. Do not be a hero and try to pick a bottom. Leave that to Jim Cramer.

Markets Resume Trading after Sandy Ripped Through the East Coast

Two days of trading were lost due to the storm, but the aftermath for many remains a daunting task. We at Big Wave Trading hope those who were affected by Sandy return to a sense of normalcy soon. The Russell 2000 led all market gains today, but was the lone bright spot in the market. AAPL’s management shake up weighed heavily on the stock as it dragged down the technology heavy NASDAQ with it. At the open stocks enjoyed a lift, but it was a negative Chicago PMI figure that soured the mood of the market. PMI figures showed a contraction for the first time since late 2008 as many continue to fear the fiscal cliff. Big Wave Trading is still under a sell signal and today’s market did very little to help reverse our course of action. Price and volume are not favorable here and until it improves we’ll continue to operate under our sell signal. All eyes will be on the ADP and jobless claims report tomorrow. Friday’s non-farm payroll figure is set to be released and it will be an important to Romney and Obama. Gary Johnson the Libertarian candidate can too use this to show under freedom and his leadership we would be able to build a more stable system. For Romney and Obama it will be a fight over the same system we have in place today. Of course, the mainstream media will do its best to spin it positively for Obama while Fox News will do the same for Romney. In the end, we care about our leading stocks and market direction. As the market goes we shall go too. The leading sectors today were the utilities, consumer goods, and financials. Oil and gas along with Technology stocks were the groups weighing on the S&P 500. Financials continue to be the stocks leading this market and we aren’t surprised. How can you not do well when you have a buyer willing to pay top dollar for a junk asset? Continue to keep an eye out for emerging winners because this market can snap back on a dime. It is good to be back in the saddle. Cut your losses short.