Stocks Claw Back after European Stocks Fall Hard

European stocks fell hard on Cyprus fears and continued economic slump the Southern Europe states are in. Cyprus, Italy, Spain, and now Slovenia are in the midst of falling stock markets and higher cost to insure debt. Pending home sales were slightly disappointing, but the market rallied off the disappointing figure and continued for the rest of the afternoon. The NASDAQ was able to close in positive territory while the Dow failed to notch another all-time high. Volume rose on the day, but remained well below average. The past two trading days has seen NASDAQ volume the lowest for this year. Volume continues to be non-existent despite this market continuing its uptrend. Institutions are either continuing to stay on the sidelines with cash or they are all-in. We can make all sorts of guesses, but we do know activity in the stock market continues to slide lower. Short-interest ratio continues to be high because volume is low. Actual short exposure measured by total shares outstanding is at a five year low. Things are not as they appear and we can certainly blame Quantitative Easing for the state of the markets. However, if you employ a trend following system based on price these matters simply fade away. It is important to stick to price and ignore the noise. The prevailing theme from market pundits is QE will continue to push stocks higher. While this may be true do we know this to be fact? Can we say QE is a tail wind or a wind at all? We do know the Federal Reserve’s balance sheet is highly correlated to the S&P 500 and why would this change? What if it does change? Do you have a plan of attack? Do you know when to head for the exits? Often times assumptions are made, but a plan of attack is never hatched. We do not know the future, but we can identify potential trend using price as our guide. Tomorrow we’ll get another read on GDP and the market is looking for .5% just like last month. To add some flavor to the day it is also the last day of trading for the month of March. Enjoy the last trading of the month! Cut those losses.

Stocks Notch Another Low Volume Summer Session; GDP Growth In line with Estimates

No surprise GDP growth was in-line with estimates as pending home sales jumped more than expected. Both figures failed to ignite buying as the market hit the day’s low just before 11am. Once again buyers stepped up to the plate supporting the market. Support wasn’t ferocious as volume registered lower than yesterday’s pathetic levels. Volume just isn’t there during the final week of the summer. Institutions are not stepping up and putting their money to work in front of Ben Bernanke’s speech in Jackson Hole. While the price support is positive it is very difficult to have much conviction in the market in either direction. According to MarketSmith’s shorting data we continue to see the NYSE Short Interest hitting 5 year highs. Are we simply seeing a massive short squeeze? Or is the SMART money right and a pending collapse is about to occur? It is anyone’s best guess here which way the market goes. Quite frankly it is much easier to doubt the market with all the potential headwinds the market faces. China, Europe, and the Fiscal Cliff can easily be used to make a bearish case. Despite the argument and from a trading perspective when do you exit your losing position? How much do you risk? Trend following is powerful because it cuts through the fundamental non-sense and positions you to what matters most: PRICE. With very little happening in the market there have been bright spots and opportunities for BWT to exploit. The last thing we want to do is miss a signal. Missing signals decreases your opportunity to capture upside and why it is so important not to argue with your system. Follow it and do not let your opinion get in the way of your trading. You’ll be surprised how much more success you’ll have by not ignoring trading signals. Remember always know your position sizing, entries, and exits! Cutting losses is your insurance policy and your number one rule!

Stocks End Higher For Second Straight Day as NYSE Volume Drops

Better than expected GDP and Pending home sales helped boost the stock market in the early going, but the rally appeared to stall out after lunch time. Heading into the 3 o’clock hour it appeared the market was ready to rollover into oblivion and then rumors started to fly. Obamacare would be struck down with a 6-3 vote by the Supreme Court justices. A big blow to Obama, but a positive for the stock market or so it’s perceived. Volume ended mixed once again with NASDAQ volume higher and the NYSE lower on the day. The close wasn’t stellar again for the second straight day with the market unable to hang onto the highs of the day. Some positives as we did close higher, but we remain in sell mode until the market can prove an uptrend can be sustainable. A few leading stocks sold off today, but two in particular were quite nasty. ORLY and CMG have been two stock market leaders for quite some time and their actions today are quite negative. Even MNST had a bad day, but CMG and ORLY were particularly ugly. This is not the type of moves you want to see out of your stock market leaders. AAPL has been relatively quiet over the entire month of June. AAPL was a major contributor for the early ’12 rally. Perhaps it is putting in a base, but for now the stock has yet to move. The picture of leading stocks is not as clear as we’d like and will continue to monitor. Tomorrow we’ll get a reading on GDP. The market is looking for 1.9% quarter over quarter annualized growth. Let’s be honest, we have zero clue what the number will be. However, we can use the price action to our advantage and follow it. If the number is lower than 1.9% it would certainly have the market pundits getting after the fed to print more money. How will the market react then? It is useless to guess here and to position yourself solely based upon your opinion on the number is silly. Use price as your guide and leave the guess work to CNBC. Stick to price and cut your losses.