Syria Headline Clips Gains; NASDAQ Shines as Volume Rises

Another day and another missed shot at a bona fide follow-through day. However, given the volume surge in the NASDAQ and its ability to clear/hold yesterday’s high things are brighter than they may seem. The Fed’s Beige Book release did little to stock movement, but now with the focus on data it appears the Beige Book has been left in the dust. All eyes continue to drift towards Friday’s job report and continue to ignore what they should be paying attention to. It is clear the NASDAQ has and continues to be the clear winner amongst the major market averages. While we didn’t get a true follow-through day today is much more positive than meets the eye. Anything is possible and with a lot of headline headwinds many will be fearful of what may or may not happen. Sure we can get a rush of sellers completely wiping out gains over the past two days, but we are missing one key component: our crystal ball. No one knows the future and we can only trade the now. While we still have a short-term downtrend it is looking more likely this market pulls out of the recent trend and resume moving higher. Volume has been above average the past few days with solid gains, not something we have been accustomed too. Stick with the process regardless of what your opinion is. We all know cutting losses and riding your winners is a staple of trend following. Ignoring these rules is hazardous to your trading. Another rule when broken that is even worse is not taking your signals. Ignored Entries/Exits over time will erode your performance greatly. Imagine losing your biggest winners over a course of the year…you’ll notice you will significantly lag the market. Not taking an entry signal and missing on potential gains is just as important as taking an exit signal. Failure to do so will end up costing you in the long run. Ride your winners and enjoy the ride.

Stocks Fall Hard in Heavy Trade; Homebuilders Rally

A slew of positive economic data helped bolster the case for the Federal Reserve to taper its money printing scheme. Apologies, taper the quantitative easing program. The S&P 500 blew by a key level we had been watching in heavy trade as well as the NASDAQ. Leading the market to the downside were small cap stocks with the Russell 2000 falling 1.93% on the session. On the positive side, a better than expected homebuilder sentiment drove housing stocks higher in heavy volume. Volatility jumped as the fear trade kicked into gear one day ahead of options expiry. A nasty day of selling ahead of options expiry and pushing our uptrend out of the way. It is important to obey your trend following rules. Did you have a stock break through a key moving average, channel, or ATR stop? Whatever your sell rules are you must obey them. Ignore them at your peril. No one knows whether or not today was a buy-the-dip-day or the start of something more sinister. Do not ignore your rules. The S&P 500 did drop below 1680 in heavy trade leading us to believe we are likely to see the major index to test its 50 day moving average. For the NASDAQ, to see its 50 day moving average will take a bit more effort by sellers. Over the next couple of trading session how each index reacts to its 50 day moving average will be a key indicator how we proceed forward. Keep your focus on price action and the market will guide you. Sentiment continues to favor the bull camp, but has come in week over week. Bulls did drop on the AAII survey with Bears inching up a bit. However, bulls still sit at 35% while bears sit at 28%. NAAIM sentiment saw a dip in bullishness due to more bearish bets being placed on the market. We have yet to see extreme sentiment, but perhaps this is apart of the “new normal.” Either way; price rules our actions and everything else is a cocktail conversation. Stick to your rules and with Big Wave Trading.

Another Hindenburg sighting; Europe Emerges from Recession

Its official European nations are out of recession as GDP rises above expectations. The news did very little for US stock futures and neither did Mortgage Applications which fell 4.7% week over week. Homebuilders once again were weak on the session and continue to look very weak. Buyers kept to the sidelines today with the market drifting in a range all day long. Keeping the market from pulling back further was AAPL as the stock punched through $500 or what was known earlier this year as the generational bottom. We continue to move sideways in this market digesting July’s gains and we remain patient studying price. Another Hindenburg sighting was made today making it the 6th time in 8 days (Business Insider and Zerohedge confirmed) the magical formula for predicting crashes has shown up. The omen doesn’t have a perfect track record by any stretch of the imagination, but it did show up in similar fashion in 2007 and 2000 prior to those bear markets. Can we reasonably guess the same will occur? No. We’ll simply follow price action and let it dictate our next move. Key levels on the downside are 1680 and on the upside is 1710. If we do see this market plunge through 1680 in heavy trade we may have something to the downside. Until then we are sticking with our plan. Here are the Hindenburg Omens: http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/08/20130814_Hind.png Homebuilding stocks continue to take a beating and today was not an exception. ITB and XHB are in downtrends and continue to act weak. Both ETFs are signaling more lows and if buyers do not step up here homebuilders are at risk of a steep decline. Probabilities say a modest decline is certainly likely. In the same boat, but further down the stream are JNK and HYG. High Yield tends to run alongside equities, but not since May. HYG and JNK continue to show weakness in the High Yield space calling into question if we are about to see some trouble in High Yield land. As the 10 year moves higher the ability for questionable borrowing will simply become more difficult to obtain. Perhaps another “omen” for this market, but we’ll need to see further evidence. Will the Hindenburg turn into something real this time around? Stay tuned.

NASDAQ Books Gains in Quiet Session

The dog days of summer hit the market with volume dropping to the lowest levels since early July. Early morning lows were met with buyers, but for the S&P 500 and the Dow couldn’t muster gains. Over at the NASDAQ and Russell 2000 were able to grab gains. Not much in the way of economic data to get the market to dive one way or another. Our uptrend remains despite the number of distribution on the NASDAQ and the S&P 500. While it is easy to make excuses and say we should be cautious, but there isn’t a way to know whether or not we have topped. We will continue to push forward and use price as our guide. Market leaders continue to act well in this market environment. It is nice to see market leaders continue to hold up well despite the number of distribution days we see. Sure, next month we’ll see a confluence of events that may or may not trip up this market. However, we aren’t there yet and guessing how the market will react to any kind of event is a fools’ game. We have price and what we know at this point in time is this market does not want to go down. If we do see major cracks in market leaders and further major distribution we’ll change our tune. Until then we’ll continue to push forward. There are plenty of people writing and bloviating about what will happen with the Fed through the end of this year. Will Big Ben taper or not? Is the next Fed chairman Yellen or Summers? We can debate how Fed policy has completely destroyed the cost of savings devastating those living off interest including pension funds. However, this is simply policy debate and should not be mixed with trading the markets. It doesn’t matter to use if the Fed will taper or if the next Fed chairman is Yellen or Summers. We’ll stick with price and leave the rest of the nonsense to others. Cut those losses short and ride your winners!

Stocks Find Strength at the Morning Lows Closed just off the Highs of the Session

After the recent bout with selling the market was able to find buyers pushing the market higher as volume swelled. Whether or not it was managers trying to get in their trades prior to leaving the Hamptons or Shore doesn’t really matter. Expanding volume as price moves higher is generally a good thing. Just after 10:30 AM EDT it appeared as if sellers were winning the day and would extend the trading losses. However, the market was able to find buyers willing to step up and scoop up shares. We did not hit new highs today, but the action was certainly bullish enough to suggest we may have another new high. Stick with the trend. Sentiment indicators crept towards the bullish tint, but not in huge waves. AAII Bull increased to 39.5% from 34.62% last week. Bears jumped too from 25% to 26.65%. Clearly more of the crowd edged towards a bullish stance week over week. However, we aren’t seeing extremes where Bulls exceed 50% and bears are well under 20%. NAAIM sentiment survey showed rose slightly from 74% to 75% invested. This move doesn’t exactly scream over exuberance from money managers putting money to work. Again, price action certainly hasn’t suggested we are at a top and even sentiment hasn’t suggested we’ve hit one either. Market leaders continue to act well in this environment despite a few mishaps with earnings: GMCR and SCTY. Even GMCR which reacted poorly to stop didn’t end the session in terrible fashion. TSLA performed well after earnings and continues to be a leader. PCLN reported today and is jumping nicely in after-hours trading at the moment. If you stick with market leaders and stay disciplined you can reach outsized gains. It takes following the methodology and not making reckless decisions. Many will still try and call a market top here. They may be right about this market and we’ll go lower. However, what we know right now is we remain in an uptrend and we are going to stick by our process. There is no need to be a hero and turn into a zero. Longevity is the name of the game and we are here to build long-term success. Have a great weekend.

Stocks close in the Red; Volume ends Mixed

Continuing with the summer trade the market closed lower lead by the Russell 2000. The NASDAQ posted back to back losses while the S&P 500 losing streak extended to 3 days. We did see a nice rally off the lows, but as soon as the rally began volume was sucked out of the market suggesting sellers left the building. NASDAQ volume did end the day higher notching another distribution day for the index. However, given the move off the lows it wasn’t a terrible distribution day. Many are blaming “The Taper” for stocks selling off. Perhaps the reason is the taper, but we aren’t picking up what the pundits are putting down. Our uptrend remains and we continue to monitor our positions and their respective price action. Solar stocks took a hit after earnings out of FSLR weren’t warmly greeted by the market. Homebuilders once again were to the downside with the entire group showing very negative price action. Given the market is in an uptrend shorting stocks is a fools game. The reason to highlight homebuilders is very simple. They were leading the market higher and now have rolled over. Financials are the only group showing strong earnings growth at the moment and if this group rolls over we’ll take notice. Earnings continue to pour in and we continue to monitor for earnings gaps. Quite a few stocks are running ahead of earnings making it quite difficult to buy with them being extended. We need sound patterns to make use of earnings. We aren’t about to gamble our capital going outside our process. Stick with the plan and execute. No need to be a hero in this market. Tomorrow we’ll get another week’s worth of job data from Initial Jobless Claims. Hard to believe this number used to be meaningless. It’s not hard to believe given the financial media’s need to fill the airwaves. You do not get an advantage by gaming initial jobless claims. It would be wise to avoid that type of trading. In after-hours trading TSLA turned heads again with its stock nearly up 10%. GRPN is another stock moving higher. SCTY and GMCR aren’t so lucky. Ride your winners hard and dump your losers.

Technology led by FB fuel the NASDAQ Higher

The NASDAQ hit a new multi-year high prior to noon time only to see sellers rush in and quickly move the index to its lows of the session. The S&P 500 was unable to sustain its morning gains too despite the efforts by technology names. Industrials and utilities helped push the SPX into positive territory. Consumer Services was the largest drag. Volume was up on the session across the board, but like most summer trading sessions volume ran below average. It is not big surprise volume is below average with the Fed on tap to deliver its policy statement tomorrow at 2pm. This uptrend remains intact given the price action we have in front of us. So many are concerned over the actions of the Fed tomorrow and are trying to gamble with how the market may or may not react. You cannot be 100% sure how the market will or won’t react to whether or not the Fed talks taper or not. It is pretty clear at some point they will taper and finally end the QE program. When is another question to be answered only by the Fed. Many do believe it will start sometime this year and with the falling budget deficit it will be interesting to see if the Fed will become the soul purchaser (monetizer) of US Treasury debt. Or will they simply taper their purchases. All fun questions to ask, but it is no way to position yourself to make gains in the market. FB gave a classic entry after posting earnings last week. The stock hasn’t looked back since it took a breather on Friday. There have been plenty of naysayers, but price action clearly shows there is a bias to the upside. AAPL was leading the charge along with FB, but pulled back from its high of the session. There is clear resistance at the February, March, and May highs. It will be interesting to see how the stock reacts at these points. A rising AAPL price is certainly a gigantic positive for the NASDAQ. Aside from the Federal Open Market Committee policy statement release second quarter GDP is set to be released. According to Bloomberg the consensus figure is for 1% annualized growth in the second quarter. Quite pathetic as the Fed has been pumping $85 billion a month since December and one percent growth seems quite pathetic. Common consensus says a higher than expected GDP figure would push the Fed to taper sooner rather than later. How the market reacts will be how we react. We will not try to game the direction of the market. Stay with the trend.

Market Participants await Economic Data and the Fed

A quiet day on Wall Street today as summer trading continues. Many are likely still trying to recover from their weekend festivities. Perhaps many were with Steve Cohen. Pending home sales weren’t as bad as the market was looking for, but was still negative month over month. Dallas Fed Manufacturing activity index was lower than expected coming in at 4.4 (expectations were for a reading of 7.5). The market was able to find its footing just after the European close. NYSE volume ran just below Friday’s level and closed that way too. NASDAQ saw volume drop too. Major indexes were able to avoid distribution given volume was lower on the day. Today was not a game changer as this uptrend continues to march on. The talk of the town continues to be whether or not the Fed Chief Ben Bernanke will hint or talk about tapering the Fed bond buying program. QE and ZIRP have destroyed those who have saved by compressing short-term and long-term rates forcing folks into riskier assets. How does this translate to how we react in the market? It does not, but as a matter of policy debate we can certainly point out how much we have destroyed the earning power from savings. Who wins out Wed the Doves or Hawks? Leading the S&P 500 higher today were utilities. Despite the 10 year yields rallying slightly today utilities found love. On the downside the two notable groups lower were Financials and Oil & Gas. While Oil & Gas lead to the downside losing .84% Financials were down .72%. If it weren’t for the Financials earnings growth would be downright dismal. ZeroHedge has been quite vocal on this point. Financials or XLF is one sector to watch. While a pullback is normal, but if the group turns into ITB/XHB would be a big red flag for this market. Until then, there is no reason to think this uptrend can’t continue. We can guess if the market has topped or not, but we simply do not have evidence it has done so. Yes, housing stocks have rolled over and are poised to continue lower. However, they are really the only group looking like the downside is the path of least resistance. Cut those losses.

Obama’s Economic Speech Fails to Inspire Buyers; AAPL Jumps

A big jump in New Home sales failed to get the market going as the homebuilders sold off hard on the news. The talk of the street was AAPL earnings and the stock’s big move on the day. Without AAPL the NASDAQ would have notched a day of distribution. The S&P 500 could not escape distribution settling down .4%. Even though the NASDAQ did not suffer the same fate as the S&P 500 it did give up almost all of the gains had at the open. Not typically something you want to see in an uptrend, but it isn’t a gigantic red flag. In after-hours trading we had quite a few earnings moves setting up nicely in the morning. We are still without enough distribution days and negative price action to call the end of this uptrend. While we may be long in the tooth we don’t have the proper signals telling us this is over. AAPL was an earnings winner as many were calling for an atrocious quarter from the technology giant. More earnings in the after-hours session will help set the tone tomorrow at the open. Earnings gaps have been a great way to play earnings season. Stocks must meet certain criteria before they can be considered, but they can be quite profitable. Homebuilders sold off in heavy volume and it comes to no surprise even with a big jump in new home sales. ITB and XHB are certainly struggling and while the housing data points to a positive outlook perhaps fundamentals truly are best at tops. In addition to ITB and XHB another key sector looks to be rolling back over and that is XLU. After rallying along with bonds (yields falling) yields raced higher today putting pressure on Utilities. Utilities are far from sexy, but along with Housing this sector is seeing quite a few headwinds. You’ll find plenty top callers in this market. It has proven to be a fool’s game trying to game a market top. Don’t call tops and ride your winners.

End of Day Selling Push the NASDAQ and S&P 500 to the Lows of the Session

Earnings season continues and the prevailing theme is for companies to beat on the bottom line, but fall short on top line growth. There are many things we can extrapolate, but in the end it won’t help our bottom line. A big miss from the Richmond Manufacturing index highlights weakness in the Northeast manufacturing sector and the market reactive negatively to the news. Spending majority of the day near the lows of the session the NASDAQ pushed into new low territory just before the closing bell. Not the type of action you want to see from a price action stand point. The NASDAQ did post a day of distribution and has been piling on a few days here. It is something to keep an eye on despite this market remaining in an uptrend. Much will be made of AAPL’s earnings release. At this time they have yet to release earnings and I’ll make a note of them when they do report. The stock has been a drag on the entire market especially the NASDAQ yet it hasn’t kept the NASDAQ from gaining nearing 19% YTD. I suspect a sharp rise in the stock will have many shorts running for the hills. Initial reaction to earnings: It appears AAPL beat estimates and its guidance is sort of inline. The reaction is positive at the moment, but the stock will need to clear some levels before any long signals are generated. Any positive news for AAPL will benefit the NASDAQ greatly and push the index higher. Stay tuned. The insane stock moves after earnings releases, makes it very difficult to hold into the report. If you do not have a sound process you will certainly lose your nerve during earnings season. If you hold an abnormally large position and are stuck it is likely your position size is too large. More often than not many traders simply do not understand risk management and adopt the “go big or go home” mentality. Unfortunately, this is not the type of approach you want in this market. The idea is to stay in the game for a very long time not just a few minutes. Make risk management a priority.

S&P 500 Hits another All-Time High

Today was a quiet day in the Market as participants ease back into trading from the summer weekend. Existing home sales disappointed where by sales dropped 1.2% month-over-month. Clearly higher rates have put pressure on the housing market. Chicago Fed Activity index show a slight drop of .13, but who really follows this index anyway. The disappointing housing figures helped push the market higher. When there are no sellers it is quite easy to push the market higher with very little volume. Volume dropped from Friday’s option expiry inflated figure, but we weren’t really expecting volume to surge. The S&P 500 hit a new all-time high on small gains, but hey it is still a new high. Distribution really isn’t hounding the market and we still no reason to call a top here. This market continues onward and upward with this uptrend despite those who continue to fight the trend. Earnings continue to be the focus and MCD delivered its results prior to the market open. Unfortunately, it missed its estimates and the market punished the stock throughout the day. Overall, those who eat less MCD tend to be a bit healthier people in general. MCD clearly weighed on the Dow Jones Industrial Average and the stock does appear to be entering into a downtrend. MCD is not a typical name we’d be involved with, but given its price action to date we’d avoid the long side. Housing stocks will begin to deliver its earning releases shortly. ITB and XHB continue to look very top h heavy. ITB looking the worse out of the two, but both clearly are struggling at the moment. Nothing in this QE/ZIRP driven market would surprise us, but it does appear the housing stocks are set to go lower. PHM reports before the bell on Thursday and it appears to be rolling over. So much of the economic recovery talk has been surrounded by the housing recovery will make this week interesting. SHW disappointed with its earnings, yet HD and LOW are near or at highs. LL reports on Wednesday too. HD and LOW do not report till the middle of next month. Keep an eye on housing stocks as well as to those who are tied into it. Gold and silver pushed off their lows nicely today. Certainly here in the short-term a bottom is in place. We have certainly seen a few cover here. Does it mean gold and silver are headed back to 2012 highs? It does not. We’ll be patient and wait for proper entries and use proper risk management before entering into any trade. Nice way to kick off the week with gains. Stick with the process and have a great week!

Stocks Gain, but Tech Disappoints in After-Hours

Better economic data hit the tape helping push the S&P 500 to new highs. The Philly Fed manufacturing index came in well above expectations. Jobless claims fell week over week. It was certainly good news from the economic front and the market pushed higher. Volume rose over Wednesday’s trade but just was about average. Summer time trade tends to be light and today’s volume is not surprising. We remain in an uptrend, but given the after-hours reaction to earnings tomorrow will certainly be a fun day. We only have one day of distribution and see no reason to call a top. INTC and EBAY struggled after earnings putting pressure on the NASDAQ today. Tomorrow the NASDAQ will have even more pressure delivered by GOOG and MSFT. Both stocks missed earnings in a big way and both were getting hit hard in the after-hours session. GOOG and MSFT had been stars of this most recent rally from December. The NASDAQ can thank these two stocks for its rise in 2013. Sentiment check: we saw the AAII Bulls drop slightly to 47%. Bears did get back above 20% to 21%! NAAIM sentiment climbed over 60%, but overly bullish bets weren’t being placed. Sentiment still isn’t at an extreme point, but it is high. Combine sentiment readings with the percentage of stocks over their respective moving averages is a possible sign we could see at least some consolidation over the next few trading sessions. It is best to stick with the program and know anything can happen. GOOG and MSFT will at least make tomorrow somewhat interesting. Combine the crazy earnings action with options expiry should excite those who watch the market tick by tick. Have a great weekend.

BAC and YHOO Soar as Stocks get back on the Winning Track

Poor housing data kicked off the morning with Mortgage Applications falling along side Housing Starts and Building Permits. However, the data wouldn’t keep stocks from ending positive as Bernanke’s testimony and continued to press the Fed would remain accommodative as long as possible. Gold and silver didn’t buy the Fed’s Chairman Statement as both precious metals turned lower. YHOO shined after its earnings report Tuesday night. BAC jumped as well after reporting earnings earlier in the day. Volume was mixed, but NYSE volume can be attributed to the huge turnover in BAC. Tomorrow is a new day and the evidence we see continues to have us operate on the long side of the market and there is no sense in fighting it. EBAY and INTC reported earnings and the reaction is disappointing so far. EBAY is nearly down 5% after guiding EPS lower for the third quarter. INTC missed on revenues and while it is not trading down 5% it is in the red. On the upside IBM reported earnings and the stock’s reaction is quite positive. The stock is hanging above 200 price level. It will be interesting to see if the stock can hang above this level at tomorrow’s open. SCSS reaction after earnings was disappointing and the stock is down more than 8%. Quite the moves here in after-hours trading making tomorrow’s open very interesting. A quick note on sentiment from the II survey as bulls jumped above 50% while bears went under 20%. Last week we saw a similar spread between AAII Bulls and bears. We’ll post these numbers in tomorrow’s commentary. Sentiment is a tough gauge for market tops as they often hit extremes as the market continues to hit new highs. It does appear we are nearing an extreme point. An area of cautionary tone is the amount of stocks above their respective moving averages. At today’s close nearly 87% of stocks were above their 20 day moving average. 75% of stocks were above their 50 day while 79% of stocks were above their 200 day moving average. We are certainly at a point where a normal correction would occur. Will it occur tomorrow? It is anyone’s guess, but it’s a friendly reminder to make sure you stick to your game plan. Ben Bernanke is keen on keeping the market away from hearing taper talk. Will the Fed chairman simply just announce the taper out of the blue? Who knows, but at this point it seems likely as any mumbling of a taper sends traders scrambling. Cut those losses and ride your winners.

Light Trading Volume persists; Stocks pull back notching a Day of Distribution

A better than expected Homebuilder sentiment reading failed to lift stocks and sent homebuilding stocks lower. Trading volume rose above Monday’s level, but again was below average. The major stock indexes did notch a day of distribution in technical terms. However, the damage was minor and we are considering this to be a light distribution day. The S&P 500 and NASDAQ Composite ended its win streak at 8 straight days of gains. Traders now await Ben Bernanke’s testimony tomorrow. There were pockets of weakness, but until we see more of this action this uptrend still is in play. TSLA was the talk of the town after the stock fell more than 18 points. The stock has had an amazing run since its initial breakout in April. The stock has more than tripled from that point to now. It is not unlikely to see the stock break after hitting new highs. If you bought the recent low volume breakout you are likely underwater and highlight a point of being nimble when buying extended stocks. However, if you are in from April you have plenty of leeway. Just remember to take profits along the way. If you have a sound trading plan you aren’t panicking over the move. If you are, come join us. Yesterday we pointed out the homebuilding sector as being weak. After initially climbing after the sentiment release the entire sector sold off. Today’s action highlights what you think may not necessarily happen. The price action as of late has been bearish, not bullish. Could the sector turn around after tomorrow’s release of Housing Starts and Building permits? The answer is yes, but given the evidence we have now it doesn’t seem likely. Stick with price and ignore the noise. There were plenty other leading stocks like XONE and SSYS who were hit today. It is not unusual to see leaders get hit, but when they begin to get hit all at once over a period of time it usually spells trouble for the overall market. Today was one day and we remain in an uptrend. Until there is sufficient evidence given to us from price we are going to stick to the long side. Maybe the top callers will be right here…or they won’t. Enjoy watching the fireworks go off courteous of the Fed Chief.

Stocks Rise as Volume ends Mixed

Sloppy action began the day as sellers immediately hit the open. However, just after 10:30 and during the Fed’s open market operations did the market find its footing and reverse course. For the fourth straight day the market saw gains, but volume ended mixed on the day. NASDAQ volume was higher on the day, but slid on the NYSE. Traders weren’t too active on the NYSE today. Perhaps tomorrow’s release of the FOMC meeting minutes is weighing on trader’s minds. Whatever it is, trading was not active today on the NYSE giving pause to this most recent rally attempt. Price action remains okay for the markets, but without a confirmation day it is looking like if this rally is to continue gains will be limited. Homebuilding stocks turned things around today. The group has been beat up for quite some time. Higher interest rates will certainly negatively impact buyers’ purchasing power. Price action in the names still needs some work to show any turnaround is possible. For now, we’ll keep an eye on the group for improvement. Any weakness will certainly be a sign of things to come for the group. HYG and JNK continue to act like junk despite HYG’s attempt today. It is anyone’s guess where rates will go next, but for now it appears higher rates are here to stay. HYG and JNK certainly have been hindered by higher rates. Even XLU has come well off its high set back in April. Anything related to yield has been taken to the woodshed. Until we get a signal otherwise, it appears these sectors will continue to be under pressure and see lower prices. It was interesting to see the XLF breakout today approaching May highs. Financials are an important indicator on where the market is heading. First we had Small Cap stocks breakout into new high territory and now with financials nearing a new high this is certainly a positive for the overall market. There are positive signs for this market and there are negative. Confused? Biased? Join Big Wave Trading and focus on winning.

Consumer Credit Jumps as Stocks End off Their Highs

The market got off to a good start thanks to Europe rebounding after Friday’s dismal performance. For the NASDAQ the high of the day would come shortly after the open and it would fall from there. The Dow fared the best today gaining 59 basis points, but it too was off its high of the day. Volume rose across the board. Friday’s volume figure was lowest for a full day of trading. Perhaps traders were still recovering from the holiday weekend. A boring day in the markets with sluggish price action and we are still without a follow-through day. Russell 2000 hit an all-time high today before pulling back, but the small cap stock index has been the best performer. It is a good sign to see the small caps to lead the way. However, we are 9 days deep into this rally attempt and the market has unable to secure a follow-through day. We could certainly get it tomorrow or a week from now, but even if we do we won’t be expecting much from it. Typically your powerful rallies will come from a follow-through day occurring on days 4 through 7. While we won’t rule out a new rally our expectations for gains will be tempered. Consumer credit rose much more than expected at 19.6 billion dollars. Expectations were for a rise of 12.5 billion dollars. Auto loans and student loans have been the primary driver of consumer credit and while many will take a rise in credit as a positive is it really just another bubble? We know student loan debt is an issue as the market has increased over one trillion dollars. At some point there will be a tipping point where we’ll no longer be able to support such a large amount of debt. Alcoa (AA) kicked off earnings beat street estimates. Expectations for second quarter earnings are quite high from Wall Street. However, pre-announcements have been negative. Follow price and have a process and ignore the noise. Stick with Big Wave Trading.

A Late Session Rally Lifts Stocks off the Lows

Another morning rally turned sour as sellers regain control. The market received positive news as total vehicle sales jumped more than expected. Once again the 50 day proved too much for the S&P 500 and Dow Jones Industrial average. Today’s volume was higher than Monday’s and not a positive for this market. We are still waiting for this market to confirm this recent rally, but the past two days have done very little to build confidence we will see a follow-through day. Tomorrow the market will close early and given the jobs report Friday it is unlikely we’ll see a follow-through day tomorrow. Tuesday’s market action mirrored closely to Monday’s action. Today we can at least blame Merkel and the demonstrations in Egypt for the sell-off, but they are simply excuses. Given the price advancement Monday morning the market would have had a short at following-through had Friday not been the day of the Russell index rebalances. Volume was there today, but price was lacking. Perhaps we’ll need to wait for Friday when we get the jobs report. Next week we’ll kick off earnings season. It will be interesting season seeing if Wall Street remains overly optimistic on earnings. Preannouncements have been on the negative side and not to mention we still have economic data to pour through. The financial media will have a field day speculating the actions of the fed. It is all noise. Focus on the process and stick with Big Wave Trading. Tomorrow’s day will likely be uneventful heading into the Fourth of July holiday. Please be safe and enjoy the day off!

Stocks Close well of the Highs of the Session

The S&P 500 and Dow Jones Industrial average were both rejected at their respective 50 day moving averages despite better than expected ISM Manufacturing data. At 10 am the market received better than expected manufacturing data helping the market to jump to the highs of the session. Another test of the highs occurred just after noon time, but sellers took over. For the majority of the afternoon the major market indexes experienced selling closing well off their highs of the day. A late day rally helped stopped the bleeding. Small caps ended the day higher outperforming the S&P 500 by more than 80 basis points. Volume simply couldn’t compete and was below average. Not the type of action you want to see from a market trying to confirm a new rally. Day 5 of the attempted market rally was certainly an interesting day. In the early going it appeared we’d be able to confirm a new rally and be poised to run higher in front of second quarter earnings. The NASDAQ did fill the gap from 6/20, but was unable to close above it as sellers appeared to be waiting to unload on the market. Unlike the S&P 500 and Dow Jones Industrial Average the NASDAQ remains above its 50 day moving average. In addition, the Russell 2000 is above its 50 day and appears poised to break into new high territory. This certainly is a positive for both indexes and potential for a new rally to be confirmed. Anything can happen here, but it appears the Dow and S&P 500 are weighing the overall market down. All eyes will be pointing to Friday’s job figure. One big negative in today’s ISM report was the jobs picture. It wasn’t pleasant as the jobs index hit new lows. Hard to believe manufacturing is picking up that much without factories hiring. Could it be humans have simply been replaced to a point where manufacturing can pick up steam without having to hire? We’ll leave the guessing to the so called experts on CNBC and Bloomberg. As long as we ride our trends executing our strategy we’ll end on top no matter what the economy has in store for us. The morning started off great, but the ending was a lot less to be desired. We do live in the QE/ZIRP area where anything is possible. Stick with Big Wave Trading and we’ll lead you to success.

Shanghai Drops more than 5% sending World Markets Lower

Despite an impressive move off the lows just after the lunch hour the final hour of trading was won by sellers. Closing off the highs of the session major markets with the exception of the Dow were down more than one percent on the day. Volume simply could not compete with Friday’s level due to quadruple witching. VIX enjoyed a volatility day closing up 6.5% to 20.12. Summer time trading has arrived and we expect the volatility to continue and given the increase in volatility we will adjust. Shanghai dove more than 5% as the liquidity issues continue to evolve in China. One thing is for certain the Shanghai Composite is in a severe downtrend and trying to catch a falling knife is not something one should attempt. Perhaps the index will get a bounce this evening, but it will likely continue to the downside over the longer-term. 2013-06-24_SHANGHAI_COMP_daily The one saving grace perhaps for our markets will be the 200 day moving average will likely serve as a reasonable spot for the markets to bounce. It is anyone’s guess whether or not it will lead to new market highs, but a logical spot for the market to bounce nonetheless. Volume will be an important key in determining whether or not institutions will come out and support stocks. Today, it was a mix bag with the final hour selling really putting the damper on a sustainable bounce. A few other items will certainly help give a lift to the markets. Both the RSI and McClellan indicators are near areas where the market has bounced historically. It isn’t a given a market bounce will occur, but if one were to occur it would not come as a surprise to us. We’ll be paying attention to our stocks and will act accordingly if and when signals come our way. Everything else is just noise. Economic data today was light, but an uptick in the Dallas Manufacturing Survey was better than expected. Tomorrow we’ll get a read on Durable Goods and Wednesday we’ll get a read on GDP. Not the start to the week bulls wanted even with the intraday rally. Make it a great week. Join the Big Wave Trading team.

Big Wave Trading Portfolio Update And Top Current Holdings

I am on my way out for the weekend as it is the summer solstice and a super moon weekend. Before I take a trip to Hana, I wanted to give a quick recap of the past week. The past week was the most unusual week since 2001 as for the first time in 12+ years our model did three switches to three directions in three days. It all started on Tuesday as a breakout above the downtrend channel on the Russell 2000 and Nasdaq switched our model back into a BUY mode. The very next day, we failed that move on heavier volume. That then switched our model from that BUY signal to a NEUTRAL signal. Then in one of the more insane moves in a very long time, the model then switched to a SELL signal with every major market moving average closing below the 50 day moving average. This then, of course, led to Friday’s big support on huge volume. The huge volume was due to quadruple witching so I would definitely not look much into today’s intraday action. This past week pretty much summed everything up as to what I expected we would see this summer following that break on 5/22. The summer chop is here and the mixed signals are back. Not only did I have sell signals throughout the week but I also had fresh new buy signals in many leading stocks. Their action was very mixed with most of the action being poor but not poor enough to be completely scared of the long side. With that being said, we got another two fresh new buy signals in two leading stocks, on Friday. If the market was ready to completely break down I do not think we would be seeing signals during a pullback. Normally, during a pull back, new long signals dry up. During this pullback, despite a lot of stocks breaking down, we are getting long signals. This hints more of a rotation than an outright top. Still, truth be told, the verdict is still out and in a QE/POMO/ZIRP environment anything and everything must be expected. This is definitely not the time to be a hero and if you do not have a methodology that keeps you in leading stocks during “scary” pullbacks in the indexes or do not have a methodology that at least gets you heavily hedged when things turn sour then it is probably wisest to avoid trading this market until a clear return to an uptrend is under way. Until that happens, I suggest new investors focusing on learning, reading, and studying history rather than try to game a summer-time market that is clearly bipolar. This bipolar action is all too familiar for trend followers that just lived through 2011 and 2012. Most of us knew that the smooth, quiet, and low volatility uptrend of 2013 could not last forever. So it is what it is. A mixed market with mixed signals. If you marry the bull side or the bear side this summer, chances are you are going to be very disappointed. Stay neutral my friends. I repeat, stay neutral. Have a great summer solstice and super full moon weekend everyone. Aloha. Top Current Holdings – Percent Gain since Signal Date – Signal Date N/A – N/A – N/A