GDP Prints above 3% as Stocks Trade in Tight Daily Range

In a surprise event 3rd quarter GDP printed above 3% above expectations. Unfortunately, the surprise to the upside failed to induce a strong response from the stock market. Initial jobless claims rose to 361,000 for the week a bit higher than expected. But, dominating the headlines was John Boehner’s plan B for the Fiscal Cliff. Volume ran lower throughout the day suggesting institutions were taking a break. Leading stocks help up relatively well while ISRG and HLF continued their declines. Financials and in particular BAC continued to march higher with Small Caps continuing their run. At the close, stocks closed near the highs of the day finishing much better than Wednesday session. Our uptrend remains intact and we’ll see how stocks react to tomorrow’s quadruple witching. News hit John Boehner pulled the vote on his Plan B sent futures MUCH lower. The Emini-S&P 500 futures dropped more than 2% in 2 seconds. The only way this occurs is with computers fighting one another. The low print was 1391 nearly a 50 point decline in the S&P 500. We aren’t about to react to the moves in after-hours session and we’ll see how we open/finish tomorrow. If we move lower and hit our exits we’ll gladly do so. For now, we’ll remain with our positions and react as our rules say we should react. There are positives in this market with small cap stocks leading the market higher. Barring a disaster tomorrow this uptrend should continue to move higher. We do have plenty of bulls in the market with the AAII Survey showing more than 46% of its respondents say they are bullish. Only 24% responded as being bearish over the next 6 months. While the percentage of bulls is not at highs it is nearing frothy levels. Remember, sentiment is far from a perfect indicator for the market. However, for the fourth straight week we have the number of bulls above 40%. Tomorrow will be fun with options in four different markets expire. Volume should soar tomorrow skewing our volume data. Price action will be pivotal given the reaction to the cancelling of the Plan B vote. There is no need to have guess work here. Stick to your plan and execute with precision. Have a great weekend and despite what many are predicting for 12/21/2012 we’ll see you next week.

Hope Continues for a Fiscal Deal, but Stocks Fall in Mixed Trade

Just the headline of a meeting between Boehner and Obama helped push the market off the lows. There is desperation for a deal for the fiscal cliff. The market for the second straight day rolled over from the morning highs. Despite doubling down on QE infinity stocks have been unable to crest above last week’s high. Volume on the NASDAQ rose giving the index another day of distribution while volume fell on the NYSE. Price action is not strong at the moment and given the lack of thrust from recent breakouts this uptrend we have been in is at risk for failing. Cash remains king. The fiscal cliff is such an interesting beast. On 11/16 we were close to getting a deal and yet four weeks later we are no nearer a decision than we were on 11/16. Our government spends roughly 25% of GDP by borrowing forty cents for every dollar spent. It is a nice thing to say we aren’t taxing the rich enough, but taxes only get us so far maybe 1/10th of the way. While we have been able to implement tax cuts we have never been able to cut spending. It is time to take our medicine and begin down the path of sustainability. This recent uptrend is still without a true follow-through day and even though we could get one tomorrow it isn’t likely it will produce tremendous gains. Days 3-7 are the sweet spot for a confirmation of a new uptrend. The lack of follow-through day simply underscores how weak this uptrend has been. Where are the stocks zooming out of bases? Sure we have had some breakouts, but they aren’t screaming higher like we normally see in a sustainable uptrend. As of now, we do not have the strength needed to continue this rally. This action is the main reason despite our model switching to a BUY signal two days ago that not one position was placed off of this signal. There was simply too much cross-currents and bad/confusing action. Our model has obviously returned to the NEUTRAL mode. No harm, no foul, this time around. Know your exits and if the situation changes be ready to adapt! Have a great weekend.

Another Wild Intraday Session as the NASDAQ Closes Green for the 8th time in 9 Days

The market has become quite an interesting beast as of late with wild swings on every press conference DC makes. First Boehner’s comments sent the Dow down 50 points in a split second only to recover after Reid and Schumer respond. Nancy Pelosi was kind enough to wait for the market close to make her comments, but at the end of the day the market has moved higher again. According to Bloomberg volume was lower across the board and continues to be light overall. We are still operating without a true follow-through day, but despite the overbought conditions the short-term trend is higher. After the bell we got word the Democrats proposal would like to raise over 1.6 trillion in taxes and immediately raise spending by 50 billion. Republicans on the other hand are ready to concede the tax issue, but not the spending. For anyone to think a reasonable deal will be struck is crazy. Collecting less than 18% of GDP and spending 25% of GDP is not a sustainable model. You simply cannot overspend what you take in to eternity. It is not sustainable. We can argue over tax rates and where we should or should not cut spending, but if you can’t agree to pay only what you take in then no real solution will be had. We are now in extreme overbought territory and it would be good for the market to take a rest over the next few days. Even one day of a pull back on light volume would do this market some good. We only need to see a few days of this market taking a rest. Distribution would not be welcomed at all and we must avoid any serious price decline. If stocks are hitting buy points take the signal and have an exit plan. Hopefully tomorrow we can avoid seeing any more press conferences by any congressional member! Get out and enjoy the weekend.