Stocks find big support; PCLN books after-hours gains

Warren Buffet’s CNBC interview was not well received by the futures market as the market was shaping up to open lower. While I don’t think nor care if Buffet was really pushing the market lower pre-market what I do care about was the market’s ability to find support. A rush of support showed up just after the first fifteen minutes of trade, just as the market appeared to be taking a swan dive. Volume jumped on the day finishing above Friday’s level showing a few institutions joined the party today. It was important to see the market find support at the lows and now we need to see the power behind this potential move.

CNBC can’t get enough tossing headline after headline of asking if this market is tired or not. We have tools to alert us to potential trouble and it isn’t guess work. Using distribution counts we can see whether or not a market is heavy and due for a potential BIG correction. At the moment the NASDAQ has three distribution days and it is not at a point where we are going to sound the alarms. A few more distribution days and/or stalling days would certainly raise high alerts. Do not guess if something is about to occur, always react to the market and its clues. Stay disciplined and stop the guess work.

PCLN was a big winner in after-hours trade after the company beat sales and revenues. Guidance for the first quarter was higher than expectations and the market rewarded the company nicely. The stock now joins GOOG at the $600 level a big priced stock with growth is very hard to come by. Yet again another growth stock posts better than expected earnings. Let’s not forget many stocks took the plunge in October as many took down estimates allowing for comfortable beats here.

The market remains in an uptrend and no matter your opinion on the health of the trend…it remains up. You are not smart enough to know precisely when it will end and if you do I have some south Florida real estate to sell you. Always and I mean always cut your losses short.

Greeks Agree to Austerity; NASDAQ Leads, but Small Caps Lag

The big news of the day was the Greek’s finally were able to come to terms on a new, new, new austerity agreement. Yes, another plan they will fail to deliver on. Volume ended the day mixed as NYSE volume slid underneath yesterday’s levels as NASDAQ volume jumped nearly 10%. AAPL was a clear winner today with their announcement of the iPad3 set to hit store shelves during the first week in March. Small cap stocks did not fare as well today closing in the red; one small blemish on the day. We continue to power higher in the market and the NASDAQ continues to see signs of accumulation. Today was another reminder to avoid fighting the trend.

Sentiment is getting a bit frothy according to the most recent AAII sentiment survey. The Bulls stampeded to above 51%. A level that is quite extreme while the bears finished above 20. Bears didn’t set a new low for this uptrend, but certainly the number of bulls set a new high. Is this “the” top in the rally? It is anyone’s guess given the amount we have run and not to mention the number of bulls. With that said, we still have plenty of stocks looking good and solid accumulation to make us believe we can continue higher.

This uptrend now has a few blemishes that could stall this rally. This does not mean it ends the uptrend completely, but it does signal we could see a quick shake out. So far, we see 1-2 hour shake outs only to power higher. Small caps were certainly a blemish, but today’s breadth was weak considering the market move. NASDAQ breadth favored decliners rather than the advancers today. Normally, an update will sport many more advancers than decliners. New highs continue to be healthy and be a positive force for the market. Given the number of stocks over respected moving averages and breadth weakening it would appear something amounting to a shakeout will occur shortly.

I could be wrong and we never see a shakeout, it is precisely why we react to price moves rather than anticipate them. Our success depends on our ability to react to price changes rather than guessing or anticipate a move. No one individual is that smart and can hit turns in the market often. Don’t anticipate the move, go with it and react as it happens.

Have a great weekend.

Stocks Close in the Green Again; Uptrend continues

Just another day in this uptrend as stocks close higher on the day recovering from early morning lows. Volume rose on the day showing institutions had an appetite supporting the market on the morning dip. It is truly amazing this market is on, a straight line to multi-year highs from what appeared to a market heading for fresh bear market lows. For now, it appears the market is more focused on the Fed’s printing presses than any country from the European Union defaulting. Stop fighting the trend as it has been very painful for those who have been.

Yes, the market is “overbought,” but it has been for quite some time. Sentiment has come down off its highs as of late, so the crowd is anticipating some sort of pullback. Anticipation is a problem if you act upon a hunch. It will lose you money either by missing out on a move or compounding your losses. While it is true we are overbought, the market can continue higher. We have defined rules for exits and until those are met, we’ll stay long.

It will be nice when Greece finally defaults. The past few weeks every morning and night headline has Greece “close” to a deal with its creditors. Just get it over and done with, they are going to default one way or another. Greece has not shown it can stick to any terms it has promised, why even bother with a new set of terms? In the end, Greece cannot pay for its obligations and liquidation needs to occur. This is a painful process for those who are dependent on the government and it will take time for it to resolve itself. Trading off this situation is too difficult; we’ll stick with the trend.

A dangerous tactic here is chasing. It is never wise paying up more than 5% beyond a proper buy point. Often time stocks will reverse shaking out weak holders and late buyers. At this juncture and with the amount of stocks extended it would not surprise me a few of them shakeout weak hands here. If you do chase, make sure you are lightning fast cutting the position if it turns against you.

Stay disciplined and cut those losses.

NASDAQ Closes off its Highs as Volume Slides, but Above Average

The market ended off the highs of the session, but with volume coming in lower we avoid a day of stalling. Russell 2000 small cap index raced higher tying the NASDAQ composite for the top index of the day. Interestingly, enough both indexes have yet to have the golden cross yet continue to lead the entire market higher. Bernanke’s testimony on the hill helped spark some buying, but as the testimony wore on sellers began to take over. We continue to play in overbought conditions, but this rally is healthy and remains that way. Tomorrow’s job report will certainly set off fireworks. At this very moment, we have a healthy rally that is a bit over-extended.

The unemployment rate will be the key statistic the market pundits will be paying attention to. Last month’s surprise move to the downside for the rate helped spark some confidence for the market in general. However, the denominator, the total employment pool continues to shrink driving down the percentage of people out of work. It is very difficult to measure unemployment, but judging by the U-6 figures as well as the number of people on food stamps our situation remains weak. Why else would the Federal Reserve hold rates steady near zero percent all the way out to 2015? If employment was actually improving there would be no need to continue to hold rates down. Enough of the economic talk, it’s about the trend.

Trend following is not an art form and trading based upon gut feel is not our style. Disciplined trading, rule –based trading is our game; it’s our edge to outperform the market. I know we harp this one lesson: CUTTING YOUR LOSS SHORT. It is vital, letting losses run ruins capital and ruins traders. Breaking your rules is another major flaw. Jesse Livermore would often break his rules only to see his net worth crumble. If you find yourself in this situation, what separates the best from the rest, the best rise again!

Have a great weekend!

AAPL Blows Away Earnings in After-Hour Session

Another great day for the stock market as again buyers step up and support the market. The market did get help from the Richmond Federal Reserve Manufacturing index as it came in better than expected. However, the market turned its attention to AAPL’s quarterly earnings report. Volume came in lower perhaps due to the Federal Reserve meeting concluding on Wednesday, but it’s anyone’s guess. More importantly, it was AAPL’s blow out quarter taking center stage. This uptrend will continue tomorrow and for the moment it continues to be strong.

There are a lot of people who are fighting this current trend and it is easily understood. Sure, we can have pullbacks, but to be calling for all out Armageddon is quite funny at this stage. It is anyone’s guess where the market will go from here despite what may appear to be “smart” analysis. We only know what is directly in front of us and we have been in an uptrend. A disciplined, ruled based approach where position sizing, cutting losses, and exiting positions is the best way to attack this market.

Tomorrow we’ll get Ben Bernanke’s take on the economy and its rate decision. Expectations are for the Federal Reserve to really keep their stance on monetary policy. Basically, they are going to decide whether or not they need to print more money. The conundrum they are in at the moment is they justified QE2 with a sluggish jobs market and with the jobs market improving they have little justification for another round. At the rate Washington, DC spends money and its inability to balance the budget the Fed will have to at some point soak up excess supply. Of course, do I know the future; no, but given with how we know DC operates not sure how we don’t go down this path.

Remained disciplined in your trading and do not deviate from the plan. Of course, cut your damn losses.

NASDAQ 100 closes at an 11 year high; GOOG closes down big in after-hours trading

Positive news for the job market as jobless claims fell hard, but it was the NASDAQ 100 closing at an 11 year high that stole the show. Yes, it is positive claims almost broke through the -300,000 level and the market certainly liked the figure. Even a slightly negative Philly Fed survey couldn’t hold back buyers from scooping up shares throughout much of the day. Volume on the NASDAQ rose again, but once again over on the S&P 500 volume fell. The S&P 500 continued its “wedge” higher as the NASDAQ remains the leading index.

The number of bulls pulled back from last week’s high, but bulls registered at 47%. Bears were able to climb back above 20%, but they didn’t make a big stand. The II survey continues to be bullish, but well off the extremes we witnessed early this year. I wouldn’t consider this market at an extreme level as far as sentiment is concerned. And with the amount of stocks we continue to find popping up this rally should have legs to run for quite some time. Again, we may see a shakeout here and there it won’t derail the rally currently underway.

Every rally will trick traders/investors to chase stocks at highs only to see the stock reverse and shaking them out. It is best to have a sound approach to buying and chasing stocks SHOULD NOT be a part of the approach. Just as important is money management, knowing how much to buy, cut losses, and exit a position is paramount. Without these tools you will be left behind.

It is clear the NASDAQ is the leading index with S&P 500 and Dow Jones Industrial lagging behind. This is precisely what we like to see. If it were the other way around, we’d have issues. Enjoy the weekend!

Stocks Close Higher Again above October Highs

Another stellar day for the bulls as stocks rose across the board. The S&P 500 closed higher for the 10th time in 13 sessions but volume fell on the index. For the NASDAQ composite the index closed higher with higher volume and it was above average. Clearly the NASDAQ is the leading index of this current rally a sign we’d like to see. Given the run up as of late, it is hard to continue to knock the ball out of the park each and every day. Use the opportunity to cut laggards and stay on your winners. Today was just another solid day in this uptrend.

The market really got going with a big jump in home builder confidence. Finally, after so long we are beginning to see an uptick in confidence from homebuilders. It remains to be seen whether or not this translates into success, but the way homebuilders are acting higher prices are ahead. Banks were helped out as well, with an improving real estate market the situation should translate well for the “toxic” assets banks continue to hold. Let’s not forget the Federal Reserve holds quite a bit of mortgage paper and continued improvement in the real estate market will surely help the quality of paper held on the Fed’s balance sheet. It all boils down to price and volume and it is positive.

I am still looking forward to seeing Sentiment indicators tomorrow. Most notably the AAII survey as it has been quite bullish for the past two weeks. Bears have been decimated below 20% and you have to wonder if this market will have a quick washout to get the weak bulls out of their positions. This would be an ideal situation for us as it will show who the true leaders are in this rally. It would then allow us to focus in on the very best and take advantage of a new rally. Sentiment is an imperfect indicator and usually works best at REAL extremes. I highly doubt we are at one now, but we are at a point where it’d be nice to shake out some weak bulls then proceed with this nice rally. Remember October of 2010 and November of 2010? Quick shakeouts only to have us lead higher. Don’t be easily shaken out, follow the game plan.

Market closes mixed with declining volume

The NASDAQ closed higher for the 6th time out of 7 days as volume continues to remain above average. Today appeared on the onset it would be a day of consolidation, but the NASDAQ would have none of that. While volume remains above average for the NASDAQ the S&P 500 continues to remain below the key volume moving average. A sign Institutions are more interested in NASDAQ composite stocks than the S&P 500. A pull back is certainly in the cards and would be a welcome sign to consolidate the recent gains. However, our trend remains up and until this situation changes we are positioned accordingly.

Tomorrow we get a bit of economic data in the morning and it will be all about retail sales figures. Forecasts are for sales to jump .20% and I wonder to myself: “do economists ever get anything right?” They don’t, it is meaningless to position yourself based upon a hunch or opinion. NO ONE knows the future we only know what we know up to a point. Sure, fiat money has an average shelf life of 35 years, but it doesn’t mean the US Dollar has to end (in one form or another) 35 years to the date Nixon took us off the gold standard. The moral of the story: price and volume tell the story you want to be listening to; follow it!

January always tends to be a tricky month for stocks. Sure, optimism runs high for the new year and as humans we tend to have emotional roller coasters and makes sense for stocks to run at the beginning of the year. However, January tends to be more of a messy month for stocks and it is quite dangerous to think live on hope of a good year. Have a game plan of how you plan to attack the market and execute the plan. There is buying going on underneath, we are finding them and you need to have a game plan to attack those names.

The key to success is using a cut loss strategy to protect your downside. It is always important to cut your losses and move on.