Another Late Day surge pushes Stocks higher as Volume disappears

Small caps lead the market higher today rebounding from last week’s losses just ahead of the first quarter earnings season. The market has been finding buyers after 3:30 pm EST and today was no different. Buyers helped push the market to the highs of the session. Volume continues to be extremely light on positive days. A show there isn’t much institutional support, but enough to push the market in positive territory. Our uptrend remains intact despite the lack of volume and we’ll continue to look for higher prices. We did not get any economic releases today and tomorrow will get a read on wholesale inventories. Not exactly exciting and nothing historically has moved the market very much. Wednesday we’ll get the FOMC meeting minutes at 2pm. A few Federal Reserve members have noted curbing asset purchases may help reducing the risks associated with printing to oblivion. It’ll be important to see how the market reacts and closes on Wednesday. Tuesday’s action isn’t likely to have any catalyst to change trend as Wednesday does. However, anything is possible and as long as you have a plan you’ll be in the driver’s seat. The big mover has been the USDJPY and the Nikkei. Central bankers in Japan have jumped the shark and have gone all-in on purchasing Japanese debt. For three straight quarters Japan has seen negative GDP growth and prospects remaining bleak. Again, the world is expecting a central banking cartel to manage using decentralized data. Bond purchases have not worked in decades and it is likely this round of unlimited purchases will have very little long term success. Will we get another Zimbabwe? Time will tell. Stick to your game plan and remain disciplined.

NASDAQ Lags as S&P 500 Ends Flat as Volume Slides; European Woes continue

Overnight the Nikkei jumped 3.8% as the country remains hell bent on trashing their currency. Europe resumed moving lower as the DAX fell more than 80 points. On this side of the pond futures were lower on the moves in Europe. Just before lunch time rumors of a special dividend helped send the stock higher dragging the NASDAQ along with it. Just after noon time fortunes for the market reversed and the market headed back to the lows of the session. It appeared as if sellers were going to rule the day. At the close, buyers were able to get the market back to breakeven. Our uptrend remains. Tomorrow we’ll get a rate announcement from the ECB followed by Draghi’s press conference. The EURUSD has been on a tear as of late as the US and Japan intend to print their respective currencies to oblivion. At this point the ECB can only cut rates as it cannot monetize debt. Draghi’s comments has moved the markets before and tomorrow shouldn’t be any different from the past. Which direction shall the market respond is anyone’s guess, but given our current uptrend we are going in long. There is some bright spots out there including DDD and SSYS. Banks continue to act well lead by BAC, GS, JPM, and one of our new longs for tonight. The action in EXPE left a bit to be desired and it appears more and more stocks reacting to earnings aren’t able to hold their breakouts. AMZN is one while having a rich PE has been performing well until the most recent earnings report. Another blemish is the two leading stock indexes we follow remain underperforming the overall market. This can change in a hurry, but we are keeping an eye on our leaders. Tomorrow morning will hold some fireworks and we are looking forward to seeing how our stocks react. Cut those losses short. Short-term trends: TICKER ST TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/6/2013 151.16 0.07% IWM UPTREND NO CHANGE 2/6/2013 90.46 0.42% QQQ UPTREND CHANGE 2/6/2013 67.24 -0.33% USO UPTREND NO CHANGE 2/6/2013 35.04 0.03% UNG DOWNTREND NO CHANGE 2/6/2013 19.36 0.94% GLD DOWNTREND NO CHANGE 2/6/2013 162.39 0.27% SLV UPTREND NO CHANGE 2/6/2013 30.81 0.16% DBC UPTREND NO CHANGE 2/6/2013 28.55 -0.14% FXY DOWNTREND NO CHANGE 2/6/2013 104.85 0.07% FXE UPTREND NO CHANGE 2/6/2013 134.13 -0.41% TLT DOWNTREND NO CHANGE 2/6/2013 115.98 0.82% QQQ changed back to an uptrend. This is due to the short-term nature of signals generating more signals.

Stocks Power Ahead as Strength Continues

Once again the market powers ahead in heavier trade indicating higher prices are ahead. Homebuilder sentiment came in as expected hitting 6 year highs, but a potential deal is likely in the Fiscal Cliff saga. All that matters here is we have a ton of stocks breaking out and price action in the market supporting these moves. We can debate over what printing to infinity will do to the US Dollar, but for now we have a big uptrend in our midst. At this point, not getting behind this rally will only leave you wondering later why you didn’t get on-board. Until we get distribution piled up this market is going to continue higher. The very bullish action at today’s close indicates that this uptrend is for real despite its many flaws. The biggest flaw in the market rally is the Federal Reserve debasing the US Dollar at an alarming rate. Printing more than 85 billion worth our currency and the effect it will have on our everyday life. Japan has been doing forever quantitative easing and it has failed to invigorate its economy. Maybe it will be different this time, but one thing is for sure prices all around will go higher. Initially, this will help our market given the recent price action. The real tricky piece will be when the Fed begins its exit from its endless money printing campaign. We are seeing a tremendous amount of breakouts it is a huge positive for this market. Amazing we have yet to see a true follow-through day despite today coming very close to actually being one. At this point it is about obeying the price action and knowing your exits. There are many stocks breaking out and showing tremendous strength. Ignoring the price and volume action in these names will more than likely be futile. Even if this rally only lasts a month if you have a sound exit strategy you will be out before any harm is done. Opinions mean very little in the market and the market is always right. Believe or not we have a rally and may be we’ll only squeak out a 10% rally, but one we’ll take. Remember, knowing your exits are just as important as knowing when you get into a position.

The Nasdaq And SP-600 Make It Eight In-A-Row With Weekly Gains As More And More CANSLIM Quality Longs Begin Setting Up In Proper Bases; The Crowd Sure

So the Nasdaq snagged that eighth-straight week of gains after all. A flurry of buying at the end of the session saved the day. That the IBD 100 led the way with a 2.8% gain for the week is what impresses me though. According to my records, there were 62 winners to 38 losers. GMCR, of course, went on the warpath to the tune of a 35% plus gain, leaving in its wake the carcass of many an unwise short-seller. Even before blowing away earnings, GMCR had printed a new all-time high and formed a very bullish three-weeks tight pattern. I remember quite clearly Bill O’Neil being asked at a workshop last December what most caught his attention when he looked at a stock’s chart: “Tight closes,” he said. “When you see tight price action you’re seeing institutions at work.” Guess those GMCR short-sellers didn’t make it to that workshop. Maybe next time.

Something else that impressed me was that the American Association of Individual Investors (AAII) reported their members had only 41% of their portfolios in stocks. Apparently, this is the lowest amount devoted to equities in AAII history. 40-50% sell-offs have a way of doing that. While equity allocation was at its all-time low, cash levels were at an all-time high: 45%. This has never happened before. It all makes sense if you recall that just a few days before the Follow-Through Day the AAII came out with a report showing 70% of respondents expected the market to continue to tank. This was the highest level of bearishness the AAII had ever seen.

This continued agnosticism, however, is intriguing. Looking at the monthly charts of, say, TNDM, LFT and ARST, I can’t help but wonder what they are waiting for.

As I write this, the Asian markets have jumped quite a bit. We shall see if this carries over to our markets. If so, we might be chalking up week number nine in a row for the Nasdaq when it’s all said and done.

--John "Author Ego" Ward, BWT analyst

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