Rumors of Central Banks Moving to Provide Liquidity Help Lift Stocks

Good news for consumers as CPI dropped, but a worse than expected jobless claims figures continues to show the weakness in the job market. The big story of the day was rumors of a joint strike by central bankers to provide liquidity to the market. Money printing operations has already pumped over $6 trillion into the market and we continue to see the need for more. Stocks did get a big boost, but failed to retake Wednesday’s high. Volume jumped on the NYSE and NASDAQ, but it continues to be very light and below average. Not too many institutions were out buying the rumor over further easing. The market continues to search for direction on day 9 of this attempted rally. Tomorrow we get quadruple witching Friday and you can bet volume will be explosive during the early going. The market will certainly be adjusting to where traders want to be positioned for the Greek elections on Father’s day. A secret “poll” was released in Greece sending Greek stocks higher ahead of this weekend’s elections, but does it even matter? Given the Spailout the Greek’s will want similar terms and then what? Can Italy borrow even more at 7% while only collecting 3%? Is piling more debt on top of debt going to work this time? This is precisely why following price and not guessing where the market will be is much more efficient way of producing superior gains from the market. Sentiment this week tipped the scales back to neutral with bears falling to 36% while bulls jumped to 34%. Neutral market participants continue to be the main driving force of sentiment. Respondents are simply not willing to step in either direction, something we haven’t seen from the market in a long time. The next major move will certainly be powerful with the number of neutral market participants remain very elevated. Happy Father’s day to those dads out there who do their job! Get out and enjoy the weekend and life!

Markets Say No to Spailout, Stage Big reversal

The EU bailout of Spanish banks was received well when the futures market first opened Sunday evening. Sellers dominated the day as the markets sniffed out and disapproved of the Spailout. US equity markets did enjoy a good start, but selling was unforgiving and relentless heading into the close. Volume was higher than Friday’s dismal showing. At this time, volume is not going to matter as price action is clearly on the negative side. Price action says it all and it is not saying good things about this market. Not helping matters was AAPL’s big reversal despite its annual June meeting. AAPL did not announce any new amazing new product like apple TV or a new iPhone. The stock now appears to be failing at its key 50 day moving average suggesting May’s lows may be the next target of the stock. GOOG has already had a head start on AAPL as the stock put in an ugly reversal day. Both tech giants do not look healthy at this point and will continue to put tremendous pressure on the NASDAQ if selling continues. Volatility kicked it up a notch today getting support as the market digested the news out of Europe. The VIX jumped right off its 50 day moving average today and certainly shows a bit of a fear coming back into the market. At May’s lows the market failed to produce any sort of capitulation. The VIX never made it above 30 a key level where panic enters the market. Until panic enters the market we’ll likely continue to see lower lows and lower highs in this market. Adding to the mess we call a market will be options expiry. Greek elections are being held on Sunday and combining the elections with Spailout options expiry will certainly add layer of complexity. It is crucial we stick to price action of the market rather than guessing what might happen if the Greek elections go one way or another. After today it is pretty clear the bias is still negative. Stick to your stops and cut your losing positions. Your long term success in the market depends on it.

Stocks end Mixed as Volume Slumps

Headlines over the weekend were quite dismal stoking the fire further over the European crisis. The market set aside the fear and jumped to the highs of the day right out of the gate. Factory orders were on the light side sending the market lower. From 10 am forward the market would oscillate throughout the day settling mixed on the session. Volume was lower on the day, but again low volume is par for the course for Mondays. This market is still searching for a bottom here and our trend is still down. Another new low was set today and a lower low at that. April’s high was the lower high we have mentioned in the past and with the market continuing to set lower lows the bear tightens its grip on this market. Sentiment is negative, but we have yet to see any panic get into the market. We may not see panic selling, but we still have yet to see any high volume reversal to signal a possible rebound. In 2011, we saw the market sell off and rally back to new highs a few times before the August sell-off. So far, we haven’t seen the ability for this market to find a bottom. It would be nice for a bit to ignore what is going on in Europe. The situation in Europe feels like it has been going on since the Bear Stearns collapse. However, Greece two years ago kicked off the crisis. There is a lot of commentary on the ramifications of Greece leaving the Euro versus staying and this goes for the other EU countries. When you get right down to it we’ll be hearing about this situation for a long time coming. At some point markets will simply sniff out the plan and price accordingly. The real bogey here is what is going to happen with the Fiscal Cliff and a renewed debt ceiling debate. Tear the band-aid off fast and do what is necessary. It is safe to say many will be predicting the outcome for the stock market. Many will be wrong of course and the trend followers will win. We only care about price and sticking with the trend. This is how wealth is created and built upon. Make this week a great one!

King Dollar Stands Tall as Stocks Fall in Heavier Trade

It is beginning to appear the European Union is on the verge of breaking up. The dollar continued its upward movement as the EURO continues to fall. Volume rose on the day, but wasn’t overly impressive given the losses on the day. Gold reversed on the day after opening the day in the red despite the rise in the dollar. Crude oil continued its downward track closing with an 87 handle. Commodities as a whole continue to fall as the Euro continues to struggle against the dollar. We are in a downtrend and likely when all is said and down a bear market. Unless this market can get a miracle there isn’t a question due to multiple factors we are headed towards a bear market. Anything is possible and we’ll adjust, but given what we have seen from this market there isn’t a reason to be optimistic for stocks in the near term. Spain is a focal point for the Euro right now, but Italy is knocking on the door as contagion continues. Greece was just the beginning and now with other struggling southern European Union countries on the brink the near future doesn’t appear to be bright. Price has confirmed we are in a downtrend and it is anyone’s guess how low we can go. An even bigger challenge for the markets will be if a State like California gets into similar trouble like Greece. California CDS has been widening and the state is $16 billion in the hole. States can’t print money to pay for their debt and must balance their budget. In addition, the United States faces the Fiscal Cliff and not to mention another debt ceiling fight on its hand. We have created a mess because we are unable to simply live within our means and outsource accountability. Keep in mind while things may be dire there will always be opportunity. We are ready, are you? Defense is the best offense at this point and while we understand the rallies will occur it will be some time before we get a healthy uptrend.

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.