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.

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.

Stocks Close Lower on increase Trade as Stocks Close out a Big January

A bigger drop in initial jobless claims did very little holding buyers back in the early going. Stocks would hit their high for the day just after the opening bell. Volume ran higher throughout the day even before the end of the month rebalancing took place. QCOM initial breakout looked strong, but sellers took over pushing the stock lower. Other leading stocks like AMZN have suffered similar patterns after earnings releases. FB was able to find its footing despite not closing at the highs. The Dow and S&P 500 both notched distribution with the NASDAQ avoiding back to back distribution days. Distribution still hasn’t added up to cause concern just yet. January was a good month for stocks and our uptrend still remains. There is plenty of talk of a correction and many are trying to be the one who calls “it.” We aren’t going to call it or not, but the probability of one has certainly crept up. Distribution days have yet to build up to say we need to be vigilant yet. However, sentiment has been running hot all month long. AAII Bulls fell week over week to 48% from 53%. 53% is not overly extreme, but elevated and even 48% is high. II Bulls rose to 54.3%, but it was the NAAIM sentiment that has given an extreme reading of 104.25. The only reading above 100 came on 3/1/2007 when the index posted 100.05. Money managers are levered long here and quite possibly signaling at the very least a short-term top. We aren’t about to bet on this and will wait for our signals. It doesn’t hurt to see where we could have a possible turn. Unfortunately the Federal Reserve has turned the Non-Farm Payroll (NFP) figure even more important. Unemployment is set to come in at 7.8% with roughly 155,000 jobs to be added. Any guess would be as good as the expectations, but the reaction to the number will be important. If the trend continues with the labor participation rate we should see it continue to fall helping lower the unemployment rate. It is almost hard to believe any number would be taken negatively by the market with the Fed pumping $85 billion into the market. We had a heck of a month and January proved staying with leaders and price action is the best course of action. Have a great weekend and enjoy the Super Bowl! TICKER ST TREND CHANGE? DATE CLOSE % SPY UPTREND NO CHANGE 1/31/2013 149.70 -0.25% IWM UPTREND NO CHANGE 1/31/2013 89.58 0.69% QQQ UPTREND NO CHANGE 1/31/2013 66.87 -0.22% USO UPTREND NO CHANGE 1/31/2013 35.28 -0.59% UNG UPTREND NO CHANGE 1/31/2013 18.76 -0.05% GLD UPTREND NO CHANGE 1/31/2013 161.20 -0.61% SLV UPTREND NO CHANGE 1/31/2013 30.44 -1.55% DBC UPTREND NO CHANGE 1/31/2013 28.47 -0.04% FXY DOWNTREND NO CHANGE 1/31/2013 107.18 -0.39% FXE UPTREND NO CHANGE 1/31/2013 134.72 0.10% TLT DOWNTREND NO CHANGE 1/31/2013 116.75 0.49%

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.

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading portfolio remains under a NEUTRAL signal. However, we did switch to a BUY signal for 2 days before switching back to NEUTRAL. Fortunately for us, we have already closed shop on our model for the year. After the final and barely successful SELL signal it was decided that with the current price/volume pattern in the overall market, the upcoming Fiscal Cliff drama, and the news driven nature of the current market that shutting it down for 2012 was the right thing to do. This past week proves that point. The past week saw a very noisy intraday nature to the market with a ton of stocks showing erratic to abnormal price action. Rather it was stocks like GMCR, FB, FSLR, AMCC, or RIMM going up almost every day non-stop or the reversal in price breakouts lower in stocks like SWHC, ARIA, QCOM, CNC, or ASPS that scripted what was an odd overall market. Even the big boys like PCLN and GOOG are showing erratic trading. This is a clear sign to us that trend following and stock picking the U.S. markets remain a very futile effort for anything other than a very short-term time frame. If your time frame is going to be weeks to months, on a position, we recommend waiting for better price and volume relationship to develop in this market. At this point for us we are very happy being heavily invested in cash and on the sidelines in our top systems. Short-term daytrading methodologies and very long-term methodlogies in world ETFs with wide volatility/ATR stops are the only two systems working for us now. The world ETF market has been the one very bright spot in all of this. The moves in VNM, DXJ, EWH, EWS, and EWA have been very welcome during a time when the U.S. markets are behaving so poorly. We continue to believe that over the longer-term more capital and bigger position sizes are going to be needed in these markets to return outside normal returns in the future. We are sure one day the stock market will trend in one direction or another for a period of time that will allow old trend following momentum methodologies in high quality stocks to work very well again. Until then, however, other markets should be where investors continue to look to into the future. That is unless we can get a change in the zero-interest-rate-policy, the Quantitative Easing environment, and extremely divided electorate some time soon. I wouldn’t place on hard bets on that happening for a while. Aloha and have a wonderful weekend! Current Top Holdings – Percent Return – Date of Signal NTE long – 118% – 8/17/12 VRNM short – 54% – 4/10/12 CAMP long – 48% – 4/26/12 CSU long – 37% – 9/4/12 ASTM short – 25% – 8/2/12Q

Big Wave Trading Portfolio Update And Top Current Holdings

The Big Wave Trading Portfolio remains under a SELL signal on all indexes. However, we do take note of the positive price action and strong volume (even though it was options expiration related) on the indexes and more importantly on the oversold beloved-stock named Apple (AAPL). Volume on AAPL was the highest since March and comes on an excellent intraday reversal. We call that positive price action. However, there is no way, based on Friday alone, to know if this is the end of the downtrend or just an oversold bounce. Some of the positives going for the market is the fact it is very oversold on the short term, the crowd is increasingly becoming more bearish, and AAPL’s price and volume move on Friday. Some of the negatives are that there is still no obvious rotation from old leading stocks into new leading stocks, most recent strong sectors (IBB XHB ITB) are starting to crack on heavy volume, and despite sentiment growing more bearish there was absolutely zero fear in the most recent pullback. Everyone truly believes Ben will save us from every big bad market decline. The only way we see it at Big Wave Trading is that you must keep an open mind to everything and anything in this new QE-fed world. There is only one two ways to trade this market: trend following signals and value investing. The old momentum methodologies that made position traders like me wealthy during our early career have been missing since the 2008/2009 stock market bottom. This is a direct correlation of a QE/ZIRP policy. So, even though it seems the market is not done selling off, you must keep an open mind in the regards that Ben will indeed come to the markets rescue any time it even attempts to move lower. We have taken notice of some stocks that made very strong moves on Friday. However, we will need to see further positive price action next week or the week after to know if it is more than a one day options expiration wonder. The social networking site FB sure has been putting in some impressive price and volume action lately. That stock is definitely a stock that should be on all trend following wizards radar. It is too much of a cult stock and has so much volume that it is mandatory active and inactive traders watch this stock for trend following signals. Overall, we remain extremely heavy cash at Big Wave Trading due to the inability to trust price and volume action in the current choppy tape. Without any spike in the VIX, it is hard to believe a real bottom is here and while we are short some index ETFs we will be ready to reverse those positions ASAP if we continue to see further price appreciation. At the same time we do know another 2010 and 2011 pullback is more than likely to happen sooner or later and we will be ready to act accordingly when the time does come calling. And come calling it will one day. You can not keep an artificial economy up forever. Can you? Maybe you can. It’s a much different world than it was before QE. Get used to it. I doubt it changes any time soon. I doubt it changes any time not too soon (4 years at least). On that chipper note, have a great weekend everyone. Surf is up on the north shore and the sun is shining. Aloha!! Top Current Holdings – Percent Gain – Date of Signal AVD long – 112% – 1/10/12 NTE long – 102% – 8/17/12 VRNM short – 58% – 4/10/12 CAMP long – 47% – 4/26/12 ASTM short – 37% – 7/17/12 CSU long – 33% – 9/4/12

Dow and S&P 500 Lead Stocks Lower as NASDAQ Finds 200 Day Support

More selling hits the street despite yesterday’s end of day rally. The 200 day provided the NASDAQ with some support, but the index failed to put in a big turn around day. Earnings continue to pour in and are only helping a few stocks. FB reported after-hours and is seeing a rush of buyers into the stock, but FB is not the norm. Volatility spiked closing above its 200 day moving average for the first time since the beginning of June when our most recent rally began. Fear has once again crept back into the market, but we lack the panic we normally see in a market bottom. Price action continues to be weak with volume still big on the downside and we remain in sell mode. Earnings season has crushed many growth stocks, but they continue to pile up. BWLD is just another victim to the earnings disaster. FB and PNRA are two bright spots, but they are the exception to the rule. NFLX was hit hard again in after-hours as the company failed to reach its user target. The stock had seen some life, but for a little over a year has been taken to the woodshed. CMG is in the same camp. The ultimate growth stock AAPL reports on Thursday and after failing to rally after its announcement of the iPad mini Thursday’s report will be important to the stock. AAPL has touched its 200 day, but has yet to top out since the 2009 bottom. More than 3 years later the stock has had a tremendous run and Thursday we’ll see if the stock can find the juice to resume hitting new highs. Commodities continue to pull back as crude oil briefly hit an 85 handle on the day. Gold and silver continue to pullback after their run up from the announcement of QE 3 or what we call QE forever. The market has now pulled back roughly 6% (NASDAQ) from the QE announcement. The market dropped roughly 3.5% from its peak from the QE2 announcement. At the moment we have support at the 200 day for the NASDAQ while the S&P 500 has yet to reach its 200 day. The election is two weeks away and it is bound to have an affect on the market. The most recent pullback has not been kind to leading stocks and it appears we’ll see this continue given the reaction to earnings as of now. Have a plan and trade. Cut losses and ride your winners. Volatility is finally showing some fear in the market and will at some point signal a possible bottom. Cash is king for now.

AAPL Leaps 5% as Stocks Rebound from Tremendous Selling Pressure

AAPL and PCLN help the NASDAQ push higher as FB drops hard on its second day trading on the NASDAQ. Volume on the day was considerably lower than Friday’s level, but Friday we did have options expiry skewing volume. Today’s bounce was not a surprise to many as the oversold conditions in the market had gotten to extreme levels. Given the green close today on the NASDAQ today counts as day one of a new attempted rally. Despite today’s rally the market still remains in extreme oversold conditions and this rally has the potential to have a bit more oomph behind it. The G8 summit only left one headline and that was they were supporting Greece as a member of the European Union. Any other headline not supporting Greece in the Euro would have sent global markets into a death spiral. It does appear a bit dire with many of the European countries having a difficult time containing spending and bringing in revenues. The European central bank will have to undergo a massive liquidity injection to avoid immediate danger. However, simply printing money will only lead to bigger problems if the fundamental problems are not dealt with. The situations remains quite dicey, but it is why we follow price and not our opinions. A lot is being made of the RSI being so low recently, but the amazing part is the lack of fear the VIX index showed as the market pushed lower. We never saw real panic enter the market as we have sold off to the 200 day moving average. AAII Bears did jump considerably last week and Bulls dropped to very low levels hinting at a possible short-term bottom forming. In our forums we highlighted the need not to push on the short side as a snap back rally was very likely. Now, the market will more than likely continue to work itself higher and it would not surprise us to see the NASDAQ make its way back to its 50 day moving average. Anything is possible and we are prepared for anything. Rally attempt is here and if this bounce has legs we’ll see a follow-through day on day 4 thru 7. Stay patient and always cut your losses no questions asked. Enjoy the week.

AAPL Falls as Buyers Continue to Stay Away from the Market

Disappointing Philadelphia Fed and jobless claims figures help set a negative tone for the day. Europe continues to dominate the fear index and FB continues to dominate CNBC’s content lineup. The true story of the day was at the end of the day with sellers taking it to the market. AAPL was a large part of the NASDAQ decline of 2.1%. The market is now in a real danger zone with the lack of buyers willing to step up could make it very difficult for this market to regain its footing. Big Wave Trading continues to operate under a sell signal and we continue to look for this market to continue lower. Sentiment continues to be negative, but the Investors Intelligence survey continues to lack the negative bearish sentiment. AAII survey certainly saw bears jump in terms of percentage and its bull ratio near lows, but the lack of bears responding to the II survey is somewhat concerning if you are bullish. The NASDAQ has corrected roughly 10% from its March highs which should be ushering in a bearish view point. However, we continue to see the neutral camp dominate the II survey. Given our current situation nothing that happens from here on out will not surprise us. FB will be an entertaining IPO and will likely be a wild ride given the current market situation. We are oversold and a bounce would not be out of the ordinary for a quick snap rally to occur. Tomorrow’s options expiry will certainly provide the morning with fireworks. The oversold nature of this market tomorrow would be as good of a time as any for this market to push higher to work off the current oversold conditions. Cash is king here and we are looking forward to the weekend. Get out and enjoy the weekend!

Stocks Fall Again As FOMC Meeting Minutes Fail to Inspire

Once again stocks were able to find footing in the middle part of the day, but fail to hold the highs. A few more FOMC members are open to more quantitative easing it wasn’t enough to help the market push back into the highs. Of course we still have the mess going on in Europe, but the market was looking for QE3 to hit the market. The Fed knows any further QE will result in very high commodity prices squeezing the poor even further. We cannot have this situation and given the situation in the Europe and here at home puts the United States Central Bank in a precarious situation. The market remains weak and while we may see a one or two day bounce the trend is still down. If one had to guess just by looking at a chart of the NASDAQ it is quite easy to see the 200 day moving average is a logical next step for the index. Yes, we are oversold and sentiment is getting quite negative we have yet to see any real panic set into the market. The VIX, a measure of fear has yet to signal real fear in this market. Perhaps a move above 30 would signal enough fear, but it has yet to eclipse the 30 level. Talk of another flash crash is always imminent given the even happened only two years ago. For now we have a market creeping lower and lower and even with FB coming public on Thursday there is very little that can save this market from the inevitable. The United States has been on a war path regarding spending. Wars, social security, medicare, prescription drug coverage, etc are a big drag on the government budget. Unfortunately, Washington DC will not tell the American public the truth. Spending needs to be lowered end of story. The Buffett tax is only estimated to bring in a few billion dollars a year extra! We have a 1.5T yearly hole at the moment that Obama feels quite comfortable with. This is nuts! The only fix is to overhaul the tax code into a one page simple code and reduce spending. However, the media and Obama administration do a great job distracting the public from the facts. If anything, the United States fiscal cliff is far more dangerous than a Greece leaving the EURO. As a reminder, this week is options expiry and Friday should be a fun day. Tomorrow will more than likely be a bit more entertaining with FB coming public. We are not planning on participating in the IPO nor trading it on the first day. We’ll sit back and wait for it to base much like EBAY and GOOG did after their debuts. We’ll be patient. Execute you trading plan and cut those losses short.

Surprise Greece unable to form Government Sending Stocks Lower

The only positive news on today’s session was the fact homebuilders are most optimistic in five years. Even Empire manufacturing ticked higher than expect, but the market was unable to take its eyes off the situation going on in Europe. For the second straight day the intraday rally was faded and during the final hour it accelerated. News out of Greece regarding the inability to pick a government provided enough ammo to sellers to push the indexes to the lows of the session. There does not appear to be an end in sight here and not the type of market you’d want to bring FB public. Big Wave Trading has been under a sell signal for a bit here and now we can see why. The market remains oversold, but if the market has taught us anything it is these conditions can last for quite some time. It wouldn’t surprise us if the market produced a rally over the next day or two to resolve some oversold conditions. However, it is quite clear the trend is down and any counter trend rally should be shorted. We can blame the situation in Europe or even point to the fiscal disaster awaiting the United States. It simply doesn’t matter, price wins and we’ll follow its lead. Just to throw a monkey wrench into the mix this week happens to be options expiry (OPEX). Always appears the market tends to get into a volatility craze prior to OPEX. Today we saw the VIX index multi-month highs confirming the selling we see on the S&P 500. This goes for the NASDAQ too, but the S&P 500 has been leading us lower and given the moves in the VIX it appears the selling isn’t done. All signals are pointing to this market pushing lower and there is not much we can do about it. Sure a bounce may occur, but it won’t have the gusto it would need to kick off a new market rally. Too much damage has occurred and it will take a lot to repair the damage. Cut your losses and enjoy the ride.

Distribution Hits the Market; LNKD Jumps After the Market Close

A better than expected jobless-claims figure was overshadowed by an overwhelmingly disappointing ISM non-manufacturing reading. Sellers dominated the day pushing stocks lower all day as volume rose on the day. The NASDAQ now with two days of distribution and the S&P 500 with four it certainly appears this market is going to play games with both bulls and bears. The late day rally was even lame as it appeared the market was going to coast into the close and a wait tomorrow’s job report. Our cautious buy signal still remains, but it appears it is in jeopardy. LNKD posted its earning after the market close and the stock responded positively. The company has posted amazing sales growth the last few quarters and the past two quarters of EPS have been outstanding. Not too many companies can sport more than 100% of sales and earnings growth like LNKD has. It is no question companies are turning to LNKD for hiring purposes, but will it translate to jobs growth? We’ll certainly find out tomorrow if this economy has been able to produce any jobs. Facebook (FB) hits the market soon and with the IPO set to price anywhere between $28 and 35 will make Mark Zuckerberg an instant Billionaire. Quite the story and amazing what you can do with a business. LNKD came to market and my recollection of the day was LNKD pricing near $45 and catapulting to more than $120 a share. It would not surprise me one bit FB does not do something similar. Don’t bet on it, but it isn’t out of the realm of possibilities. Tomorrow will be just another day, the jobs report is something the CNBC/Bloomberg/FBN talking heads can fill the airwaves with. Their job is to (this is key so remember) sell advertising and not to make you money. Have a sound game plan and execute it. Money management is so pivotal in this process and without it you will be left out to dry. Cut your losses and have a great weekend.