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.

Stocks Extend Gains for Third Straight Day

Early morning rally from European markets albeit on continued economic weakness helped fuel early morning gains in US Futures. China didn’t help matters with a disappointing Flash PMI reading with the Shanghai falling 2.6%. US economic data didn’t surprise to the upside with the Markit US PMI came in at 52.0 with the expectations at 53.9. The Richmond Fed Index fell to -6 reading showing continued weakness in US Economic data. New Home sales did gain more than expected fueling a big rally in equities. Even with a mini-flash crash mid-date due to the AP being hacked the market was able to claw higher with volume expanding. The market continues its choppy ways as more economic data is set to be released tomorrow. How could we not mention AAPL till the second paragraph? AAPL released earnings at 4:30 pm EST beating estimates for the quarter. Guidance was weak at best with margin compression taking hold. The company raised its dividend by 15% and doubled its stock buyback program by $50 billion! Initially, the stock jumped on the news. However, by the close of the after-hours session the stock fell back below the close of the normal market hours. Weakness is not a trait we want to see in our stocks and with the weakness in AAPL we’ll leave the stock be for now. Outside of AAPL’s earnings the entire after-hours session was filled with earnings disappointments. EW, CREE, PNRA, and AMGN are just a few stocks having a tough time with earnings. AMGN has been a big winner for the NASDAQ producing decent sized gains for the index. VMW was another earnings loser with the stock tumbling 6% in the after-hours session. Holding through earnings is a dangerous game and if you do not have enough cushion or you are holding in size it is prudent to reduce your position. ARMH was certainly an earnings winner, but this time of action post earnings has been somewhat scarce. Stick with your rules and earnings season will go smoothly. Tomorrow we’ll get a read on Durable goods with Autos expecting to bring down the figure. Given all the negative economic readings it would be fitting this number will disappoint too. We’ll follow price and ignore the noise. Stick to your rules and cut your losses!