Stocks Close the Quarter Higher Despite Disappointing Economic Data

The market was hit with disappointing GDP and Jobless claims figures prior to the market open. Then again just after the open with a very disappointing reading from the Chicago PMI. Despite the disappointing economic reports the market as able to find enough buyers to keep stocks in green territory. Small caps lagged the broader market as the S&P 500 led the way. VIX slipped again as buyers continue to remain complacent as fears over a correction are simply non-existent. Our current uptrend remains intact and although we do have a bit of distribution we aren’t going to throw in the towel on this rally just yet. GDP growth was revised up from .1% to .4%, but still below the expectations of .5%. At this rate, .5% is not going to cut it for the US. Even 2% GDP growth will not improve our situation greatly. Perhaps the size of the US economy is a hindrance, but we need growth in order to pay for all the services we want the government to provide us. It is anyone’s best guess if this translates to higher or lower stock prices. If we were growing like Chile with 5% GDP growth we’d be creating jobs like gangbusters! The economic pie needs to grow and we need policies that aid the growth. Enough of the economic talk and get back to price action. Gold and silver continue to trade in downtrends while Oil has resumed an uptrend. One commodity in particular, Copper continues to trade in a downtrend. Copper is a decent indicator of economic growth and right now it is not singing the praises of the economy. JJC is an ETF to track Copper and it shows quite clear the commodity is in a downtrend. Natural gas continues to remain in an uptrend even with some high volume down days. It wouldn’t surprise us if the October high is breached. Outside of Crude Oil it doesn’t appear the freshly minted cash from the Federal Reserve is finding its way into commodities. Enjoy the long weekend. Next week we’ll get a bombardment of Economic data from across the world. It should be a fun time. Cut those losses.

Stocks Pop and Drop on High Volume

Today’s start to the day appeared as if the market as about to resume its bullish trend. Economic data was non-existent besides a disappointing Flash PMI out of China. Europe was rallying hard on hopes of an optimal Italian election outcome. By mid-morning it became clear the Italian elections were going to be less than optimal. Sellers just didn’t stop as Europe close, but continued through the end of the session. Volatility soared more than 30% as this uptrend has come to an end. Big Wave Trading’s model has moved to neutral after 3 big distribution days in four days. Today is not what you want to see from the market when you are bullish. We may get a bounce, but this market will need some time to repair itself if we are to get another uptrend. We are in neutral mode as this uptrend has ended. Today’s McClellan Oscillator hit -206.85 an extreme oversold reading. What is funny at the highs of the session the oscillator was neutral. We aren’t that far from the highs and to be in extreme oversold conditions is slightly surprising. It would not surprise us if this market finds some footing and reclaims some of today’s losses. Anything is possible, but after the past 4 days of market action it is clear the trend has changed. It will take quite a bit to turn this ship around. Regardless of what we’ll encounter we’ll be ready. There is quite a bit of economic data that is about to hit the market. Tomorrow we’ll see a lot of home related items, consumer sentiment, and the Richmond Fed. Thursday we’ll get another read on fourth quarter GDP. Last reading we saw a negative reading and expectations are for revisions to put fourth quarter GDP at .5%. While .5% is better than negative growth the mere fact we are only able to grow at .5% is simply unacceptable. Perhaps we need to revisit our economy and the role government has in it. Government has been running trillion dollar deficits since 2009 and we get .5%? It is quite pathetic. It is time to demand better. A bounce would not be unexpected here as we are a tad oversold. However, it is clear from the past four trading sessions this market is on edge. Short-Term Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/25/2013 149.00 -1.90% IWM UPTREND NO CHANGE 2/25/2013 89.02 -2.21% QQQ UPTREND NO CHANGE 2/25/2013 66.31 -1.24% USO DOWNTREND NO CHANGE 2/25/2013 33.21 -1.16% UNG DOWNTREND NO CHANGE 2/25/2013 19.08 3.92% GLD DOWNTREND NO CHANGE 2/25/2013 154.34 0.90% SLV DOWNTREND NO CHANGE 2/25/2013 28.07 0.86% DBC DOWNTREND NO CHANGE 2/25/2013 27.47 -0.47% FXY DOWNTREND NO CHANGE 2/25/2013 107.35 2.32% FXE DOWNTREND NO CHANGE 2/25/2013 129.55 -0.96% TLT UPTREND CHANGE 2/25/2013 117.03 1.97%

The Market Remains Oversold and Unable to Rally

A late day push helped the market from closing near the lows of the session. Disappointing bottom callers the market was couldn’t rally and close into positive territory. Volume dropped from Wednesday’s level, but at this point we’ll need to see a heavy volume reversal to signal any sort of bottom. Financials helped the S&P 500 from sliding further as the XLF found support at its 200 day moving average. Despite the help from financials the market could not overcome the pressure put on by sellers. Our sell signal has been a big winner for us and we remain in our sell mode. Tomorrow’s option expiry should bring in volume, but it will be interesting to see how the VIX reacts to options expiring. At this point we have yet to see the VIX jump showing fear has crept into the market. Given we have yet to see capitulation it is hard to fathom we saw any sort of bottom today in the market. It was nice to see financials rally, but it was only one group to rally while the rest of leading stocks took a beating. We could be just around the corner from a bottom, but the real question will be is when we do bottom how deep will it be? Why trend following works very well is you do not need to know how deep or how high a market can go as an investment decision. A disciplined approach is how we are able to take advantage of the markets. Defined entries and exits takes the guess work out of deciding whether or not if you get in or out of a position. Guessing a bottom in the market is just silly and has yet to prove fruitful. The allure of catching a bottom is simply too much for some, but you’ll notice they never make it long term. Stick with a disciplined approach and Big Wave Trading. Have a great weekend and remember to cut those losses short.

For the Second Consecutive Day the Market Closes in the Red

Another day of selling hits the markets, but at least we did not see the high volume Wednesday ushered in. The NASDAQ dove below its 200 day moving average yesterday and the S&P 500 joined the club today. While both indexes appear to be in free fall mode the VIX index closed lower on the day. Fear seems to have sidestepped this market despite the back to back days of big selling. AAPL had an epic day of selling as more than 37.5 million shares were trading with the stock closing just off the lows of the session. This type of action occurs when you have an over-owned stock being sold and it never ends well. Stocks are hinting at worse things to come and despite QE from the Federal Reserve sellers are ruling the day. Talk over the fiscal cliff is just talk as we’ll likely see the proverbial can kicked down the road. This is what politicians do best is kicking the can down the road. The issue really is how much taxes will rise. You can bet regardless of your income levels you will be paying higher taxes next year. At this point the market is simply trying to price the affect of the fiscal cliff. Spending cuts in the bill are roughly 10% of the budget deficit and not likely to be as devastating as the rise in taxes. We talk about not going over the fiscal cliff, but at some point we’ll have to pay for our debts and the longer we put it off the worse it will be. It is no surprise to us we remain in a sell signal even if we think a fiscal deal will be struck. Price and volume action remain the key in this market. We aren’t about to stick our necks out and try and pick a bottom. Yesterday’s dip buyers were hit hard today and losses are not something we enjoy seeing. Judging by the McClellan Oscillator we are in extreme oversold territory with a reading -147 for the entire market. It is not THAT extreme, but in an area where the market is capable of snapping back. A bounce here would not surprise us in the least. However, if we are to bounce we’ll need to see this market confirm a new market rally before we operate on the long side. Guessing when the market will turn would not be a disciplined approach. Perhaps a rumor of a fiscal deal would reverse the trend here, but it is anyone’s guess. We’ll continue to operate in sell mode and stay patient. Have a great weekend!

Market Finds Relief, but Volume Fades

The NASDAQ managed to regain its 200 day moving average, but light trade confirms institutions aren’t willing to stick their necks out supporting this market. A positive ISM Non-manufacturing figure gave a bit of a boost to the markets. However, the European close provided sellers an excuse to tackle the market. In the end, the markets put in a nice day of gains. We are still a long ways away from getting a healthy market with the lack of volume on the upside. Until we see improvement we’ll continue to see lackluster trading. The fear trade lost traction today as the VIX lost its 200 day today. The index regained its 200 day Friday of last week when the NASDAQ and S&P 500 dove below their respective 200 day moving average. We did not see panic rush into the market during this decline. Panic begins with the VIX racing above the 30 level and so far investors have yet to panic. Sentiment is on the bearish side, but actions have yet to show any capitulation. Tomorrow we’ll get a few economic releases, but the big one will come out at 2pm eastern standard time. The Federal Reserve will release its Beige Book and the market will certainly get active around its release. Every market pundit is foaming at the mouth with the possibility of the Federal Reserve introducting another round of Quantatitve Easing. It is a sad state of affairs when the addict can only survive on the drug. For trend followers we simply do not care if QE will show up or not. Price will always be the first mover and we want to be onboard. Drop the opinions and follow price! Believe it or not today is Day 2 of another attempted rally for the stock market. It is nice we are above the 200 day for this rally attempt. At this point a rally confirmation is on the low end of the spectrum. We failed to see any panic/capitulation in the market and have yet to see any high volume reversal to the upside. However, a confirmation day here would certainly change our tune in the short-term. Until then, we’ll wait patiently and continue to operate under a sell signal. Cut those loses short.