Volatility Jumps as the Dow closes Green while Small Caps Lag

Positive housing data kicked off the trading day with Building permits jumping higher than expected. However, it was just after the 10 am hour the market dove as CNBC blame worries over the Cyprus bailout. Volume started the day off light despite the positive housing data. Institutions were jumping in the market buying up shares as volume suggested. It wasn’t until the hysteria over Cyprus did volume kick into another gear. The S&P 500 and NASDAQ did notch a distribution day, but they weren’t as bad as they could have been if the market closed at its lows. Volatility measured by the VIX jumped more than 8% as it appears traders and PMs alike are beginning to buy protection. We remain in an uptrend and with the Federal Reserve tomorrow we’d expect activity to pick up after the Fed releases its policy statement. The Dow continues to be the leader among the major indexes. Today KO led the way for the index, but with the Dow leading it does give us pause if we’ll see this rally continue. At this point we do not have enough to say this rally is over as distribution simply isn’t piling up (YET). Leading stocks aren’t screaming higher suggesting we can continue. However, on the flip side they aren’t breaking down in droves saying we are about to crater. Stay disciplined here and do not rush in to be a hero. Wednesday’s Federal Reserve meeting will certainly be something the financial media will savior. I am sure Ben Bernanke will try to calm any fears the Federal Reserve will withdraw “support” of the financial markets. We’ll kindly remind everyone the Fed has more than tripled its balance sheet since 2008 and provided Trillions in guarantees to the market. I suppose a few trillion more won’t hurt. We are in an uptrend and while this could change tomorrow there is no telling if it will. Those who tell you they know where it is heading are full of crap. No one can predict the future. Know your exits and let your winners ride!

Volume Jumps after the Fed releases its Meeting Minutes

Building permits and housing starts failed to inspire the market, but the selling didn’t start ramping until the FOMC meeting minutes. Volume for much of the day was running lower than Tuesday’s level as traders were waiting on the Federal Reserve’s latest meeting minutes. Upon the release it was clear from the release the Central Bank is at least talking about ending the or at least curbing the latest round of asset buying. The minutes also revealed the Fed is a bit more optimistic about the state of the economy and therefore could reduce the size of their purchases. Sellers didn’t need much more than that to take stocks below last week’s low in heavy trade. One day doesn’t make a trend, but today we finally saw some heavy volume selling. Our uptrend is on shaky ground and it is a prudent move to make sure you have your exit strategy in place. AAPL continues to weigh on the overall market, but today sellers took to the entire market. GOOG dropped back below $800. Crude oil fell more than two points with Gold and Silver falling hard on the day. One day doesn’t make a trend, but it is these types of days where you stand up and take notice. When indexes and leading stocks get hit hard you have to take notice and adjust. Know where your exits are and make sure you stick to your plan. It will be important for this market to find its footing to keep the uptrend alive. Selling in bunches like today are a big red flag for the market. Your stocks will let you know what is going on and if you are noticing your stocks are quickly hitting your exits it is a good sign the broader market is about to head lower. We are in caution mode and will need to see this market shake off today’s selling. Know your exits! Short-term Trends: No changes for today, but any further selling we are likely to see SPY, IWM, and QQQ flip to downtrends. TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/20/2013 151.34 -1.25% IWM UPTREND NO CHANGE 2/20/2013 90.83 -1.86% QQQ UPTREND NO CHANGE 2/20/2013 67.19 -1.54% USO DOWNTREND NO CHANGE 2/20/2013 34.17 -2.26% UNG DOWNTREND NO CHANGE 2/20/2013 18.32 0.11% GLD DOWNTREND NO CHANGE 2/20/2013 151.44 -2.50% SLV DOWNTREND NO CHANGE 2/20/2013 27.59 -2.99% DBC UPTREND NO CHANGE 2/20/2013 27.92 -1.13% FXY DOWNTREND NO CHANGE 2/20/2013 104.82 0.05% FXE DOWNTREND NO CHANGE 2/20/2013 131.68 -0.85% TLT DOWNTREND NO CHANGE 2/20/2013 115.92 0.30%