Dow Jones Industrial Average Ends Higher for the Fifth Straight Session; AAPL Slide Continues

Big headlines of the day were better than expected retail sales and the slide in AAPL. Going unnoticed was the outside reversal the Russell 2000 index staged. Not going unnoticed was the heavy volume selling in AAPL for the second straight day. The stock continues to see sellers and has now closed under $500 mark for the first time since February 2012. DELL gained for the second straight day taking the sting out of the slide in AAPL as rumors about a possible takeout swirl. Not a bad day for the markets, but outside the Russell 2000 we do not see the major averages pushing to new highs. Whether we are consolidating or not remains to be seen, but the fact we can’t move higher immediately does give us pause. Until we get real sell signals this uptrend still has a chance to push higher. Another big headline of the day was FB news of their new search tool. Lacking the big “wow” factor the stock ended lower on the day. FB has had quite the run and sellers took advantage of the news and sold the stock lower. Does it mean it continues? No one knows and we have yet to see a true sell signal in the stock. We would welcome the stock to pause setup a base and breakout. For now, we’ll see how it progresses over the next few trading sessions. If you are long, make sure you have a game plan on where your exits are. Tomorrow morning we’ll get earnings releases from JPM at 7am and GS at 7:30am. Both stocks have moved out of bases and are higher at the moment. Either stock would not be buyable if they were to gap to the upside. Let’s not forget banks were a big driver for growth in the S&P 500 earnings last year and will be important for the trend to continue for banks. One could think they should have great earnings with the Federal Reserve Bank buying up their mortgage portfolios, but we really do not have a clue. Both stocks will drive the action tomorrow along with volume. How they end up will be key to how the S&P 500 acts. A perfect example of how a breakout should work is XXIA. While the pattern is far from perfect as we can find many flaws the last two days is how we expect stocks to act after running. It is not unwise to take some gains off the table after the monster run. It too has triggered the holding rule of running more than 20% in less than 3 weeks. A strong stock with earnings set to be released on 2/6/13. This uptrend just doesn’t want to die just yet. Look for prices to continue to move higher until we get solid sell signals.

DELL Lifts on Buyout Rumor as AAPL sinks Volume ends Mixed

A very quiet day as volume on the NYSE runs very light below Friday’s level. AAPL, RIMM and DELL shares supported the higher volume on the NASDAQ, but were unable to push the NASDAQ into the green. AAPL was able to close above $500, but it continues to come under selling pressure. The DELL news helped the NASDAQ and the rest of the market when it jumped above $12 a share. All in all today was a quiet day on the NYSE. The NASDAQ did see higher volume notching a day of distribution, but with DELL’s move helped remove the sting a distribution day would give. We can argue about the headwinds existing for the market, but for now the uptrend remains in play. Tomorrow we will get quite a bit of economic news to hit the market at 8:30. We have the following: Empire Manufacturing, Retail Sales, and PPI. It is anyone’s guess to how these figures will move the market, but they will likely move it. At least we can blame the Fiscal Cliff or any move the market will make. There will be a lot made of the retail figures due to the holiday season and how Black Friday may or may not have pulled sales into November rather than December. Boiling it down it is all noise and the market action is all we care about. Leading stocks acted well today for the most part. We continue to see decent action amongst the leaders. One leader LULU was hit in after-hours trading after lower revenue guidance. In after-hours trading the stock is off more than 7%. XXIA continues to act well push higher by almost 9%. The right side of this pattern didn’t have much volume, but we continue to see positive price action in the stock. We have a few other stocks we were looking at that are close to breaking out or have. You’ll have to check out our forums tonight to get the names. Action here certainly supports higher prices, but we keep on waiting to see this market push higher. Have a plan and execute the plan. Make this a great week!

The Dow and Russell 2000 Close Positive as the NASDAQ 100 Limps into the Close

Economic news was mixed with a disappointing durable goods figure and a better than expected Kansas City Fed Manufacturing reading. The dollar rose again as the European situation continues to act as an annoyance to the market. Europeans cannot get their act together and we continue to suffer having to see it used an excuse for bad execution. Volume dropped on the day and below average showing institutions weren’t dumping stock. We have seen the market gain support at the lows in back to back sessions as a sign buyers are willing to step in. Today was day 4 of an attempted rally and we’ll be looking for a follow-through day soon if this rally has any legs. The number of AAII bulls jumped back above 30% since it hit lows last week. Bears dropped below 40%, but held just at 38%. Sentiment remains bearish, but well off the extreme levels we saw last week. The Investors Intelligence survey didn’t move much, but tilted towards the bears. Sentiment is by far from the holy grail of investing indicators, but it does help at extreme points. Last week we saw a market massively oversold and sentiment heavily skewed towards the bears. For now, we have lifted these conditions and move forward. Cloud computing stocks took it on the chin after NTAP reported earnings. The stock got hammered and two other names FFIV and VMW were handed heavy losses as well. These moves along with DELL held back the NASDAQ. FFIV may have found support at its 200 day but cloud stocks have not been the leaders like they were in October of 2010. Former leaders tend to be the best shorts and if any of these stocks give us the signal we’ll jump aboard. This market still remains in a precarious position. The S&P 500 and NASDAQ have put in a lower high (end of April) and a lower low here in May. We are in a down trending market. Remember, in the fourth year of a bull market on average a 9 month bear market occurs. Given the lower high and lower low we could be in the midst of the 9 month bear market. Anything is possible and we’ll stick by our disciplined trading no matter what the market has in store for us. Have a great memorial day weekend!

Stocks Race off the Lows as European Bank Recapitalization Rumors Fuel Rally

A better than expected new home sales failed to spark a rally in the markets as traders turned once again to the European situation as a reason to sell the market. Sellers were in control for much of the day as the European situation remains dire. In particular is the situation going on in Greece and the run on banks taking place with the fear of leaving banks with extremely low levels of capital. Rumors began to float in the market regarding a plan being hatched to recapitalize all of Europe’s banks. Such a plan was certainly seen as a viable plan saving the European Union for now. Volume rose across the day as support at the 200 day is clear for now and a rally to push back up into the 50 day seems likely. Day three of the attempted rally appears to be headed for confirmation. Let’s not get ahead of ourselves as we have had quite the destruction over the past month. The current market looks eerily similar to last year’s where we experienced wild swings in the market. This market is going to fool many here. If this market is going to follow last year’s path we are going to see this market whipsaw many of its participants. The rally off the October 2011 wasn’t going to be easy to handle and neither is the aftermath. INTC and MSFT were two big losers on the day for the NASDAQ as DELL earnings helped send both stocks lower. DELL was hit after it missed earnings and was a complete and utter disaster of an earnings release. Sellers took to the stock and were relentless and with sympathy so did INTC and MSFT. All three stocks were weighing heavily on the NASDAQ, but were unable to hold it back from closing positive. Europe is such an annoying thing to talk about, but it dominates the news media. The best thing that can happen in terms of the US Dollar is to see the EURO collapse. Germany is single handedly holding up the entire currency and without the country the EURO would have already been torn apart. At the moment the US dollar is trading like the EURO is about to head to the toilet to be flushed away. Thus, we get lower commodity prices including lower gold and silver prices. More importantly energy and food prices are coming down as well which can only help our economy. Selfishly the EURO can’t break up soon enough! Continue to stay disciplined despite the market environment!