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!

Dow and S&P 500 Lead Stocks Lower as NASDAQ Finds 200 Day Support

More selling hits the street despite yesterday’s end of day rally. The 200 day provided the NASDAQ with some support, but the index failed to put in a big turn around day. Earnings continue to pour in and are only helping a few stocks. FB reported after-hours and is seeing a rush of buyers into the stock, but FB is not the norm. Volatility spiked closing above its 200 day moving average for the first time since the beginning of June when our most recent rally began. Fear has once again crept back into the market, but we lack the panic we normally see in a market bottom. Price action continues to be weak with volume still big on the downside and we remain in sell mode. Earnings season has crushed many growth stocks, but they continue to pile up. BWLD is just another victim to the earnings disaster. FB and PNRA are two bright spots, but they are the exception to the rule. NFLX was hit hard again in after-hours as the company failed to reach its user target. The stock had seen some life, but for a little over a year has been taken to the woodshed. CMG is in the same camp. The ultimate growth stock AAPL reports on Thursday and after failing to rally after its announcement of the iPad mini Thursday’s report will be important to the stock. AAPL has touched its 200 day, but has yet to top out since the 2009 bottom. More than 3 years later the stock has had a tremendous run and Thursday we’ll see if the stock can find the juice to resume hitting new highs. Commodities continue to pull back as crude oil briefly hit an 85 handle on the day. Gold and silver continue to pullback after their run up from the announcement of QE 3 or what we call QE forever. The market has now pulled back roughly 6% (NASDAQ) from the QE announcement. The market dropped roughly 3.5% from its peak from the QE2 announcement. At the moment we have support at the 200 day for the NASDAQ while the S&P 500 has yet to reach its 200 day. The election is two weeks away and it is bound to have an affect on the market. The most recent pullback has not been kind to leading stocks and it appears we’ll see this continue given the reaction to earnings as of now. Have a plan and trade. Cut losses and ride your winners. Volatility is finally showing some fear in the market and will at some point signal a possible bottom. Cash is king for now.