NASDAQ Jumps off its 200 Day Moving Average in Increased Trade

Day three of the NASDAQ’s most recent attempted rally ended on a solid note with the index gaining 1.44% on increased trade. Big Wave Trading’s model has moved into neutral territory as we did see the market make solid gains. Traders in QQQs and SPYs didn’t overwhelming support the move as the ETFs showed volume come in lower. However, volume in the ETFs hasn’t mattered in determining a new market rally and today did not diverge. Banks lead by BAC continue to act well in this market and continue to get support from the Fed. Diverging from the market rally were Gold and Silver closing the day lower. Tomorrow’s job report is the highlight of the week and surely be a big focus for market pundits. The NASDAQ put in an impressive move today. Suffering on the day was the VIX or fear index. Even during the decline fear never picked up to the point where you would say investors aren’t fearing any decline in the market. Volatility ETFs were once again slammed and continue to show themselves as a very difficult trading vehicle. But, now the market will have to deal with the jobs report tomorrow and election on Tuesday. In the after-hours session plenty of stocks are moving higher. MELI and FSLR weren’t as fortunate as PCLN, LNKD, FOSL, and SBUX. Many of these stocks have been beaten up since the summer time. LNKD continues to trade higher despite sporting a PE near 200! Remember, CSCO in the 90s had an astronomically high PE and was a huge winner. PE only matters on the way down and not when the stock is moving higher. Remember, price will dictate your actions not where the PE trades. Many growth stocks are given high PE ratios by traders. It is when supply and demand deteriorates to a point where the stocks falls hard. It is only then when the PE was too high. We’ll see what tomorrow brings for these stocks, but they are performing well in the after-hours session. We are no longer in oversold territory after today’s move. We are back to neutral in our model and will await a confirmation day. Friday represent day 4 of an attempted rally for the market. Remember, cut your losses. CORRECTION: WE REMAIN UNDER A HARD SELL SIGNAL ON THE DJIA/SP500 BUT ARE NEUTRAL ON THE NASDAQ, RUSSELL 2000, AND NYSE. OVERALL, WE ARE NEUTRAL, WITH A TINY HEDGE REMAINING IN THE SPY/DIA. WE WILL DELETE THIS SMALL REMAINING HEDGE IF WE SUBSEQUENTLY CLOSE HIGHER ON FRIDAY.

Volume Jumps as Leading Stocks Slump

A big distribution day strikes the market, but the real story is how leading stocks fared in today’s session. While we can focus on INTC, AA, or CSCO the real story is how leading stocks acted today and what they are foreshadowing. Distribution days happen in uptrends and are quite normal. However, today’s action in leading stocks foreshadows a very bleak picture for the market ahead. While AAPL price wise held up okay volume was much higher suggesting sellers are winning the battle. Our major market averages are above their respective 50 day moving averages, but it does not appear underneath it all things are looking good. One major leading stock happens to be QCOR and today’s reversal after yesterday’s big point gain smells quite FISHY! Other leading stocks like ISRG, PCLN, FOSL, CMG, and LULU are breaking down and are not playing nice in the sandbox. This action usually spells out trouble for the market even though our distribution day count is low. It is never a good sign when your leading stocks get pounded and is often a sign for more trouble ahead. Tomorrow will be an interesting day in an option expiry week. We get the FOMC meeting minutes from the most recent Federal Reserve Open Market Committee meeting. I am sure the market will be itching to see if the Fed talked about further bond buying or what we like to call MONEY PRINTING. Quantitative easing or money printing or monetizing debt which ever you prefer is something the market has been hoping on. We’ll see if the Fed talked anything about more bond buying. At this point, what else will it do other than monetize our debt and make us become more like Japan? For now, this is all speculation and the action we are seeing is quite negative for the market. There are many headwinds facing this market and many of them are known. However, what the media calls “headline risk” is simply a non-factor for trend followers. We follow price not what Mandy says on CNBC is breaking news. Cut those losses.