Dow Winning Streak Continues as Volume Expands

Once again the Dow was able to close higher as volume jumped on the day. It was nice to see volume expand above Wednesday’s level. However, volume remained well below its 50 day volume average. We can’t have everything. Jobless claims fell less than expected a sign perhaps the labor market is improving or there just aren’t that many people working to sustain a high level of job losses. Producers prices came in as expected. It appears we have carbon copies of intraday action with this market. We near lows of the session around 2pm EST only to find buyers pushing us back to the highs of the session. Sellers simply cannot find any footing to sustain any pressure. Thus, we have a lack of fear as seen with the VIX hitting another 6 year low. More gains in our uptrend and we aren’t about to argue with the market. Sentiment has swung back in the favor of the bulls with every sentiment survey showing a healthy amount of bullishness. While we do have quite a bit of bullishness we aren’t at extremes. One extreme we are at is with the II survey showing bears at 52 weeks lows. The reading of 18.8% hasn’t been seen in quite some time. AAII bears register at 32%, but the individuals in this survey typically flip flop and is difficult to get a solid reading of sentiment. On the other hand, the II survey of professionals tends to be a bit more smooth and reliable. NAAIM survey showed the positioning of its members fell a bit, but still well in the bull camp. We aren’t in extreme territory for the bulls, but with II bears in an extreme territory may at the very least signal a short-term top is nearing. We simply cannot know whether or not today was the high of the year. There are plenty of signs this market can still go higher despite the risks involved with endless QE. Inflation, so far remains tame and we’ll get a reading of CPI tomorrow prior to the market open. If you have gone to the gas station and/or grocery store you know prices have been steadily rising. However, I doubt these price increases make their way into the figure tomorrow. The government uses techniques to distort the truth in the inflation figures. Any hints at a possible early end to the Federal Reserve’s QErever plan may scare the markets. Anything is possible and if you follow price and leading stocks your trading results will be just fine! Make it a great weekend and as always cut your losses short.

Volume Slips Despite the Market Finding Support at Session Lows; CSCO Soars in After-Hours Trade

Led by a solid rally from the Russell 2000, stocks found support more than once throughout the day. New home builder confidence was better than expected again as consumer prices were below expectations according to government figures. Unfortunately, the economic figures didn’t spark any sort of excitement among institutions. Volume was lower on the day and certainly a black mark on the day, but it was the fact the market was unable to eclipse yesterday’s high that is somewhat concerning. We’ll need to see the market build off today’s gains and have volume flood the market. Not a terrible day by any stretch, it simply just left us wanting a bit more from the market. In the after-hours session CSCO provided the market with some good news as the stock beat earnings and boosted its dividend. John Chambers is notorious for speaking what he sees (despite seeing a great economy at the end of 2007) and this time his comments weren’t as bad as they were in March. If you remember back in March CSCO’s earnings provided a downside catalyst with its negative view of the economy. This time around it doesn’t appear to be all that bad according to CSCO. The stock is trading more than 80 cents higher in after-hours session. Friday we’ll get the dreaded monthly options expiry. Volatility did pick up yesterday, but still remains relatively tame. Option expiry weeks are notorious for increasing intraday swings and volume in the market. Thus far, we have not seen either. Perhaps tomorrow will be a different day, but nothing is guaranteed. Earnings plays like KORS, FLT, and others have provided some good solid profits for those taking advantage of the morning gaps. Tomorrow we’ll get PRGO and ROST reporting earnings and tonight NTES will report. We’ll be paying close attention to these stocks as they open tomorrow and will take advantage if the opportunity presents itself. Another interesting point to continue to look at is the sell-off in bonds. TLT and TBT are two ETFs to watch but the 10 year has gone from 1.4% to 1.8% in a short time. That is one big move in bonds recently and it will be interesting to see how mutual fund flows react to rising yields. Remember, rising yields are well correlated with stock market returns. Keep an eye on yields. Now that hump day is over we’ll be looking forward to another fun summer weekend.

Stocks Stall Mid-Day as VIX Jumps off the Most Recent Lows

Just after noon, stocks took a dive, after rallying from the morning lows. The final hour of the trading session ushered in sellers pushing the major stock indexes to their final lows of the day. Only the last 5 minutes did we see buyers step up and save the market from broad distribution. Perhaps the robots are going crazy, but today’s action does constitute as a stall day. This most recent uptrend does have two distribution days across the board and now one stall day. Yesterday’s bullish intraday action was done so on light volume and therefore not as significant as today’s action. While not an end all be all day it is important how the market reacts over the remainder of the week. Today’s action is a red flag for the most recent rally and we’ll need to be aware of the market movements for the rest of the week. Still, overall, we remain in a slight uptrend and will invest accordingly. The VIX finally woke up on a day where intraday volatility was not relatively large. Fear has been absent since June when the market hit its most recent low. Perhaps the Federal Reserve put has driven away sellers, but today they did come back. Interestingly enough on March 16th the VIX hit a low of 13.66 and yesterday the index hit a low of 13.67. While it did not pin point an exact high the NASDAQ would hit its intraday high a little over a week later on the 27th of March. Perhaps this market can rally further and why it is important to see the action over the next couple of days. In order to continue to move higher we’ll need to see bullish price action. Keep an eye on distribution and stalling the rest of this week as it will be a hint where this market is heading. It took to the 3rd paragraph to talk about economic data! Retail sales jumped more than expected, but PPI came in hotter than expected. The market cheered the retail sales figures, but largely ignored the economic reports on the day. In the end, it really doesn’t matter and all that matters is how we concluded the day. Leave the economic talk for the water cooler discussion and not your trading. Tomorrow we’ll have more fun with economic data in the morning with CPI figures. If the CPI comes in higher than expected, it will certainly be viewed as a negative. Ben Bernanke knows further easing will bring on higher commodity prices and with the drought in the mid-west it presents a very delicate situation for the Fed Chairman. It is all about executing your trading plan. Know your position sizing, entries, and exits.

NASDAQ Closes in the Green as Stocks Find Support at Friday’s Lows

It was another quiet Monday trading session, as AAPL and GOOG lead the NASDAQ higher closing just off the highs of the session. Volume was once again lower on the day, as we proceed through the dog days of summer. Commodities traded lower on the day, as gas at the pumps has rebounded higher putting pressure on consumers. When the market hit its lows, after the 11 o’clock hour, buyers began to show up supporting the market. While volume wasn’t highe–showing institutions piling back into the market–the price action was considerably bullish. There is quite a bit of economic news set to hit the market the rest of the week and we’ll certainly see the market move. PPI data out tomorrow and CPI data out Wednesday will certainly spark debate regarding Federal Reserve policy. The more we see deflation the more folks will make a case for another round of quantitative easing. To us it is noise in regards to our trading, but for a cocktail party (a boring one) it makes for good banter. Price matters most and although debating Fed policy is fun for some it is not useful for our trading. Today was overall is a bullish day, but boy was it a boring day. Europe was mostly lower and we failed to get any rumors from central banks. Boring days are good when you do not get epic failures from leaders. Leadership remains thin here and cash is king, but we have seen stranger things from this market. The next big thing from the US Central Bank is the Jackson Hole summit at the end of this month. All eyes will be on Ben Bernanke to see if he hints at or lays out the plans for another easing program. Up until then, I’d expect very little from the Fed. Rumors will always be present, but price always gives the clue. Remember the most important part of trading is knowing entries and exits. Cutting losses is most important piece to your trading!