A hiccup at the Federal Reserve led the central bank to release their latest meeting minutes at 9am EST. Despite several members favoring tapering the money printing operation by mid-year the market took off. Leading the charge was the NASDAQ, but on the Russell 3000 it was the most heavily shorted stocks boosting stock market gains. The Dow and S&P 500 closed at historic highs while the NASDAQ was only able to muster multi-year new highs. We are a ways off from the all-time highs set in the dot com era. Price direction has been spot on here even faced with two slight sell-offs. Stick with the trend and for now it remains up! It is clear the market favors more QE than less. Last Friday’s job report shows this economy just can’t muster enough jobs. Will the QE program work remains to be seen. Again, we have put faith in the Federal Reserve will be able to allocate capital properly to ignite the economy. At least for now a few members within the Fed are keen on curtailing the program. For now our stock market likes it giving us an uptrend to work with and when/how this will end will be something to see. Technology stocks led the way today as seen by the NASDAQ Composite gaining 1.83%. Russell 2000 was right on the NASDAQ’s heels gaining 1.8%. Small cap stocks had been lagging as of late, but finally saw a bit of reprieve from underperformance. The Dow Jones Industrial Average finally lagged as we have seen the Blue Chip index lead over the past few sessions. It is good to see the NASDAQ and Small Cap stocks lead and we’ll like it even more if they continue to stand in front. Earnings season will ramp higher with $JPM and $WFC reporting earnings on Friday. Financial stocks have been the bread winner when it has come to earnings growth for the S&P 500. Bank earnings are particularly difficult due to how much or little the bank decides to release its loan loss reserves. Of course it is a big game and more importantly price will tell us everything we need to know. However, if bank earnings can’t sustain its recent pace the S&P 500 will need to find earnings growth from another group. We continue to operate in an uptrend and cut our laggards as we move forward.

Dow and S&P 500 End Higher for the Fourth Consecutive Day

A positive reading from the ADP employment survey helped fuel stocks early pushing the Dow further into all-time high territory. BAC helped push the Dow as the stock aims to hit new highs on strong volume. By mid-day the markets were off their highs awaiting the Federal Reserve’s Beige book. The Federal Reserve noted growth in the economy due to gains in housing. Initially pushing stocks off their lows it appeared the Beige Book would send the stocks into new highs on the day. The rally would stall out just after 3pm. A late day small push off the lows by the bulls kept the major indexes from closing on their lows. It was good to see the market avoid distribution just after hitting new highs. GOOG and AAPL were drags on the NASDAQ today. AAPL continues to act poorly while GOOG pulls back after two big sessions. Both companies are fighting over the smart phone universe and both stocks are heading in different directions. A key point in both stocks is their relative strength. Focus on stocks with high relative strength and in the case of GOOG and AAPL is demonstrates the importance of relative strength. A few IPOs continue to act well. Our Platinum members were alerted to EOPN Monday morning to its potential. When IPOs act well you can bet the market is healthy. We’d love to see stocks like EOPN and EVER continue their moves higher. There is a lot of chatter about how far this market rally can go. Does it really matter where it ends when you focus on your exits? Sure, we’d love for this uptrend to never end and we go up every day. However, we know this is simply will not occur. No one knows how far or how long this will last. Therefore, we must have exits we know maximize our potential to take the maximum gain possible from the market. Otherwise, we’ll be leaving gains on the table and we strong dislike leaving gains on the table. Stick to your game plan. Let your winners fly and cut those losses.

Strong Price Action Led by Banks Backed by Volume

Today we saw strong action from banks and homebuilders as the Russell 2000 led all major market indices higher. Today was quite a pivotal day with price action and volume coming together. This market still remains without a true follow-through day, but the move today was strong enough with volume to show there are legs to this rally. We may not know the extent of the money printing consequences yet (along with ZIRP), but the action we are seeing compels to act to get long the market. The market may be anticipating a debt-deal, better than expected holiday sales, or even better than expected housing data. Who knows? The fact remains we are seeing strong price action suggesting the market will continue its advance higher. Still no follow-through, but the market is doing enough to have us act on the long side of the market. The market is clamoring for a fiscal cliff deal to avoid seeing spending cuts that would immediately impact the bottom line. Sales of companies who receive orders from the Federal Government would take a hit and any deal to avoid such cuts the market perceives to be a good thing. At some point the deficit will matter and the debt will matter. At this given point in time the market does not appear to care very much about running massive deficits. The Federal Reserve has all but signaled its willingness to fund the deficits if need be. Do not let your opinions fool you from making portfolio moves. This market is poised to continue a move higher given its recent action. Missing it because of an opinion you have is not an excuse when the S&P 500 is a reaching 1500. Will it? It has the potential to, but then again do you want to regard missing a signal because of an opinion. A key component that many market pundits will leave out is when you are going to exit a position. Just because they say go long this or that they tend to leave out when to exit. We could very well move much higher, but when do you exit? Do you ride your shares through a correction? If you cannot answer your exit point it should be top priority to know when you exit. Do not waste your time and efforts looking for a fiscal cliff deal. The market is anticipating a deal and we aren’t about to wait for it to happen. If the market does roll over we have our exit strategy to protect our downside. Banks, homebuilders, and small cap stocks are leading and we are going to follow them.

Stocks Stage a Big Rally, but Hit Some Resistance

The S&P 500 and Russell 2000 found very little resistance at last week’s high as the NASDAQ backed away from its high of last week. Volume was strong, but the market could not find enough buyers to clinch a true follow-through day. We continue to operate without a follow-through day, but with the NASDAQ and the rest of the indexes above their respective 50 day moving averages we are back in buy mode. The move at the end of the day does bring a bit of caution and only did a few buyers at the end of the day save the rally. Tomorrow’s reaction to the FOMC rate announcement and Bernanke’s press conference will tell us a great deal about where this market is headed. We are in buy mode despite the sluggish end of day action and will look for this trend to continue. We simply cannot ignore the move in small caps today with the index lagging only the NASDAQ today. Breaking out of a small consolidation area the group pushed higher and continues to look quite solid. It is very hard to ignore the relatively strength displayed by the group and we are going with it. Focusing in on price action IWM looks poised to continue its move higher. Of course, we have an exit plan and if this move fails we’ll simply exit and move on. There is no need to guess what may or may not happen here, but for now small caps look poised to lead this market higher. AAPL continues to be the talk of the town, but it too found resistance at its highs. GOOG did manage to get above its 50 day moving average during the trading session. However, by the close the stock was unable to close above it. Bad news for the stock as it is doing a lot of work well below the mid-point of its most recent sell-off. On the bright side of things CRM was able to punch through and breakout on very strong volume. We’ll see once again if this breakout can hold. QIHU, SSYS, DDD continue to struggle after breaking out. Tomorrow brings on the Fed and the potential for a fiscal deal. It will be fun watching the market dance to the sound of Ben Bernanke’s voice.

Markets Resume Trading after Sandy Ripped Through the East Coast

Two days of trading were lost due to the storm, but the aftermath for many remains a daunting task. We at Big Wave Trading hope those who were affected by Sandy return to a sense of normalcy soon. The Russell 2000 led all market gains today, but was the lone bright spot in the market. AAPL’s management shake up weighed heavily on the stock as it dragged down the technology heavy NASDAQ with it. At the open stocks enjoyed a lift, but it was a negative Chicago PMI figure that soured the mood of the market. PMI figures showed a contraction for the first time since late 2008 as many continue to fear the fiscal cliff. Big Wave Trading is still under a sell signal and today’s market did very little to help reverse our course of action. Price and volume are not favorable here and until it improves we’ll continue to operate under our sell signal. All eyes will be on the ADP and jobless claims report tomorrow. Friday’s non-farm payroll figure is set to be released and it will be an important to Romney and Obama. Gary Johnson the Libertarian candidate can too use this to show under freedom and his leadership we would be able to build a more stable system. For Romney and Obama it will be a fight over the same system we have in place today. Of course, the mainstream media will do its best to spin it positively for Obama while Fox News will do the same for Romney. In the end, we care about our leading stocks and market direction. As the market goes we shall go too. The leading sectors today were the utilities, consumer goods, and financials. Oil and gas along with Technology stocks were the groups weighing on the S&P 500. Financials continue to be the stocks leading this market and we aren’t surprised. How can you not do well when you have a buyer willing to pay top dollar for a junk asset? Continue to keep an eye out for emerging winners because this market can snap back on a dime. It is good to be back in the saddle. Cut your losses short.

Stocks Sink as the European Breakup Fears Grow

The market got a double dose of bad news as Greece inches closer to a Euro exit and Italian short-term bond yields jump. Volume rose on the NYSE by a small fraction, but fell over on the NASDAQ. Italian CDS along with Spanish CDS jumped on the day as yields rose for both countries. Traders and investors continue to pound on the PIIGS for their troubles and the global markets are reacting negatively. To highlight the fear VIX jumped to multi-month highs. Everything in the market as well as commentary points to very bearish outcome. There are plenty of reasons for this market to turn lower. A Greece exit is projected to be a very costly, but may be necessary venture. In the long run it may be the best case scenario to stop endless bailouts. In addition, the market is sniffing out the ramifications of the fiscal cliff the United States is headed towards. Higher taxes and lower spending to curb deficits will certainly lead to an economic slowdown. When you include government spending in GDP (remember, government has to take from corporations and consumer) of course when government spending is contracting so will the economy. There isn’t much other than taking our medicine we can do to avoid the inevitable. One saving grace in the near term is the oversold conditions we have in the market currently. While conditions can remain oversold for quite some time coupled with the overwhelmingly bearish talk and lack of bulls it would not be inconceivable for a rally to occur. Shorting at obvious times tends to end in disaster for many. Have a game plan and execute it flawlessly. Over the next 24 hours at some point Greece will decide one way or another if they will pay more than 400 billion dollar principle payment. It’ll be interesting to see if they are going to pay it or not as it will be a significant headline driving the morning buzz regarding the market. It wouldn’t surprise me if somehow the Greeks were allowed an extension or some sort of relief to avoid a potential disaster. Have a game plan and leave the guess work to CNBC’s market pundits. Cut your losses short and enjoy this market.