Stocks Pop and Drop on High Volume

Today’s start to the day appeared as if the market as about to resume its bullish trend. Economic data was non-existent besides a disappointing Flash PMI out of China. Europe was rallying hard on hopes of an optimal Italian election outcome. By mid-morning it became clear the Italian elections were going to be less than optimal. Sellers just didn’t stop as Europe close, but continued through the end of the session. Volatility soared more than 30% as this uptrend has come to an end. Big Wave Trading’s model has moved to neutral after 3 big distribution days in four days. Today is not what you want to see from the market when you are bullish. We may get a bounce, but this market will need some time to repair itself if we are to get another uptrend. We are in neutral mode as this uptrend has ended. Today’s McClellan Oscillator hit -206.85 an extreme oversold reading. What is funny at the highs of the session the oscillator was neutral. We aren’t that far from the highs and to be in extreme oversold conditions is slightly surprising. It would not surprise us if this market finds some footing and reclaims some of today’s losses. Anything is possible, but after the past 4 days of market action it is clear the trend has changed. It will take quite a bit to turn this ship around. Regardless of what we’ll encounter we’ll be ready. There is quite a bit of economic data that is about to hit the market. Tomorrow we’ll see a lot of home related items, consumer sentiment, and the Richmond Fed. Thursday we’ll get another read on fourth quarter GDP. Last reading we saw a negative reading and expectations are for revisions to put fourth quarter GDP at .5%. While .5% is better than negative growth the mere fact we are only able to grow at .5% is simply unacceptable. Perhaps we need to revisit our economy and the role government has in it. Government has been running trillion dollar deficits since 2009 and we get .5%? It is quite pathetic. It is time to demand better. A bounce would not be unexpected here as we are a tad oversold. However, it is clear from the past four trading sessions this market is on edge. Short-Term Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/25/2013 149.00 -1.90% IWM UPTREND NO CHANGE 2/25/2013 89.02 -2.21% QQQ UPTREND NO CHANGE 2/25/2013 66.31 -1.24% USO DOWNTREND NO CHANGE 2/25/2013 33.21 -1.16% UNG DOWNTREND NO CHANGE 2/25/2013 19.08 3.92% GLD DOWNTREND NO CHANGE 2/25/2013 154.34 0.90% SLV DOWNTREND NO CHANGE 2/25/2013 28.07 0.86% DBC DOWNTREND NO CHANGE 2/25/2013 27.47 -0.47% FXY DOWNTREND NO CHANGE 2/25/2013 107.35 2.32% FXE DOWNTREND NO CHANGE 2/25/2013 129.55 -0.96% TLT UPTREND CHANGE 2/25/2013 117.03 1.97%

Volume Ends Lower as Stocks Close off the Lows

The week of consolidation continues as debate over whether or not this market can go higher rages on. Overnight China’s flash PMI disappointed showing the country continues to slow significantly. China’s disappointment sent futures lower across the board. US economic data continues to be uninspiring as jobless claims remain high. Buyers did step up at the end of the day putting a bullish tint on the day. Volume ended the day lower across the board as the NASDAQ escaped a day of distribution. Week’s like this one will certainly shake the confidence of those who are long the market. Our uptrend remains and we’ll remain long this market until price tells us otherwise. For those who simply follow price do not concern themselves with whether or not a trend is over. At the moment we have plenty of folks including Elliot Wavers citing extreme bullishness as a reason the market is about to head lower. Hey, they could be right. No one knows the future and the way the market is acting says the uptrend remains intact. Tomorrow may change and those calling for a correction may be right, but what if they are not? What happens then? We follow price action of our stocks and the market. Everything else is noise. The one sentiment survey I do talk about here is the AAII survey. At the moment the split between bulls and bears is 38% to 34%. Both figures remain at extremes and this survey was done earlier in the week. As the market heads sideways are those who are bullish going to remain so? We can come up with an infinite about of scenarios and guesswork on what may or may not happen. Guess what, it doesn’t matter! Football season is in full swing and we’ll have another fun filled weekend after tomorrow’s option expiry. After a long week of consolidation tomorrow will be interesting to watch. Have a great weekend!