NASDAQ Lags as S&P 500 Ends Flat as Volume Slides; European Woes continue

Overnight the Nikkei jumped 3.8% as the country remains hell bent on trashing their currency. Europe resumed moving lower as the DAX fell more than 80 points. On this side of the pond futures were lower on the moves in Europe. Just before lunch time rumors of a special dividend helped send the stock higher dragging the NASDAQ along with it. Just after noon time fortunes for the market reversed and the market headed back to the lows of the session. It appeared as if sellers were going to rule the day. At the close, buyers were able to get the market back to breakeven. Our uptrend remains. Tomorrow we’ll get a rate announcement from the ECB followed by Draghi’s press conference. The EURUSD has been on a tear as of late as the US and Japan intend to print their respective currencies to oblivion. At this point the ECB can only cut rates as it cannot monetize debt. Draghi’s comments has moved the markets before and tomorrow shouldn’t be any different from the past. Which direction shall the market respond is anyone’s guess, but given our current uptrend we are going in long. There is some bright spots out there including DDD and SSYS. Banks continue to act well lead by BAC, GS, JPM, and one of our new longs for tonight. The action in EXPE left a bit to be desired and it appears more and more stocks reacting to earnings aren’t able to hold their breakouts. AMZN is one while having a rich PE has been performing well until the most recent earnings report. Another blemish is the two leading stock indexes we follow remain underperforming the overall market. This can change in a hurry, but we are keeping an eye on our leaders. Tomorrow morning will hold some fireworks and we are looking forward to seeing how our stocks react. Cut those losses short. Short-term trends: TICKER ST TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/6/2013 151.16 0.07% IWM UPTREND NO CHANGE 2/6/2013 90.46 0.42% QQQ UPTREND CHANGE 2/6/2013 67.24 -0.33% USO UPTREND NO CHANGE 2/6/2013 35.04 0.03% UNG DOWNTREND NO CHANGE 2/6/2013 19.36 0.94% GLD DOWNTREND NO CHANGE 2/6/2013 162.39 0.27% SLV UPTREND NO CHANGE 2/6/2013 30.81 0.16% DBC UPTREND NO CHANGE 2/6/2013 28.55 -0.14% FXY DOWNTREND NO CHANGE 2/6/2013 104.85 0.07% FXE UPTREND NO CHANGE 2/6/2013 134.13 -0.41% TLT DOWNTREND NO CHANGE 2/6/2013 115.98 0.82% QQQ changed back to an uptrend. This is due to the short-term nature of signals generating more signals.

Stocks Rebound from Monday’s Losses on Higher Volume

The market quickly erased majority of Monday’s losses in one session. Volume rose across the board from Monday’s level. Monday’s have been for quite some time light volume days and higher volume kicking in today was not a surprise. Banks led the way while Small caps lagged along with the Dow. One day does not make a new trend and why we weren’t quick to jump off the bandwagon yesterday. Volume on the NASDAQ has been above average both days this week and we’ll need to see some price movement with this volume. We remain in an uptrend and will continue to act accordingly. Interestingly enough the QQQs have flashed a new Downtrend in our short-term trend following signal. It could very well be false, but a signal is a signal. IWM and SPY still remain in their uptrends for now. However, the FXY continues to fall as the Yen weakens considerably. It has been quite some time since we have been witness to this type of a collapse of a currency’s value in quite some time. If you have a process born from rigorous testing you follow it religiously. Stick to the plan and execute! Tomorrow we will not have any major economic releases. Today we did get January’s ISM non-manufacturing reading. Expectations were for a reading of 55 and the print was 55.2. The market rallied on the news of beating expectations by .2! December’s reading was revised lower to 55.7. New Orders declined from last month’s pace leading a few to believe the index will be heading lower this month. Bottom line the market liked the number and pushed higher. This week we’ll certainly need to see last week’s high taken out if volume continues to remain above average. Remember, to cut your losses! Short-term Trends: TICKER ST TREND TREND CHANGE DATE CLOSE % SPY UPTREND NO CHANGE 2/5/2013 151.05 1.01% IWM UPTREND NO CHANGE 2/5/2013 90.08 0.90% QQQ DOWNTREND CHANGE 2/5/2013 67.46 1.47% USO UPTREND NO CHANGE 2/5/2013 35.03 0.72% UNG DOWNTREND NO CHANGE 2/5/2013 19.18 2.73% GLD DOWNTREND NO CHANGE 2/5/2013 161.96 -0.02% SLV UPTREND NO CHANGE 2/5/2013 30.76 0.23% DBC UPTREND NO CHANGE 2/5/2013 28.59 0.39% FXY DOWNTREND NO CHANGE 2/5/2013 104.78 -1.37% FXE UPTREND NO CHANGE 2/5/2013 134.68 0.46% TLT DOWNTREND NO CHANGE 2/5/2013 117.02 -0.89%

Stocks Rally to Close out the Week despite Lower than Expected Job Growth

The market was able to shake off a disappointing jobs figure on Friday morning failing to print 200,000 jobs. AAPL was another loser on the day slipping more than 2% weighing down the NASDAQ while the S&P lead by banks and energy was able to push higher. Banks continue to do well with the Federal Reserve buying their mortgage portfolios. For the week it was a monster move for stocks and a monster fall for the VIX. This market does not have any fear and traders are positioned for this market to continue to push higher. Small caps continue to dominate hitting new highs and until banks and small caps turn there is not a reason for this market not to push higher. It was a stellar week for plenty of stocks and there appears to be more gains had. However, since the 11/16 move off the lows (when we were close, but not close to a fiscal cliff deal) we have come a long ways. This is not to say we can’t continue to march along, but there are some things saying this market needs to digest some gains. The number of stocks above their 20 day and 50 day moving averages at least suggest a shorter term pull back. However, the number of stocks above their 200 day says something different. Price will dictate our actions, but it is always prudent to be on your toes. The VIX has been decimated with fear fleeing the market. VIX is simply an indicator of market position via options. At this point in time the VIX is simply telling us traders are positioned for an upside move. Albeit a crowded trade at this point, but big bets are being made for an upside move after the fiscal cliff deal. Unfortunately for the market crowded trades can work well in the short-term, but not so over the long haul. Short-term this market appears to have legs and will look for it to move higher. Another debt ceiling showdown coupled with warnings from Rating Agencies of a possible downgrade will be another treat dealt to us by DC. We would not be in this mess if DC only spent what it took in. Make it a great weekend!

Big Wave Trading Portfolio Update And Top Current Holdings

After a quick trip back into the NEUTRAL zone, our models all switched to BUY on Monday the 17th. Unlike the previous BUY signal in which no action was taken, this BUY signal was actionable. The move on Monday came with strong above average volume on all four major market indexes. All four indexes also produced pocket pivot point buy signals on the same day. On top of that, banks, homebuilders, and small caps led on the day. While the signal on Monday was solid, further confirmation came the following day as all indexes followed through on the gains on even higher volume producing a second pocket pivot point buy signal in a row. However, more importantly, all ETFs, leveraged ETFs, inverse ETFs, and inverse leveraged ETFs confirmed the move by moving higher on strong volume. The volume confirmation in all indexes, with bank and homebuilding stocks leading, and an improving macro environment was a good step in the right direction for market bulls. However, as we saw on Friday, it is definitely not going to be smooth sailing ahead with items like the Fiscal Cliff around to spook traders or algorithm HFT programs. Still, the intraday reversal does show that the market has some solid support in it as traders try to play catch up to the almost daily move higher by the market from the November lows. Many traders who wanted to get long but never had a chance because the market never pulled back will statistically more-than-likely due to the solid foundation of the overall market buy the dips. So is it up up up and away from here? Nobody knows because absolutely 0.00% of all human beings alive today can accurately predict the future. The fundamentals and technicals do support that thesis. Sadly, this isn’t a free country or a free market anymore. It is a manipulated economy that is orchestrated to serve the bankers and no one else. The ZIRP and QE policy that they pursue to save the most elite of the elite will absolutely cripple the poor and middle class. While this effects traders on the consumer price level we at least can mitigate the damage by being involved in the only place this toilet paper money is going to go. World equity markets. If you have the ability to trade, you have the ability to win in this game where surely many are going to lose. On that chipper note, I wish everyone a lovely holiday season. I hope everyone has a wonderful time with friends and family. Have yourself a very Merry Christmas and a very relaxing New Years. Aloha from Maui where Christmas never quite feels like Christmas. Hey, it is a little cold. Not long sleeve T-shirt cold. But it’s a little chilly. Once again, aloha. Top Current Holdings – Percent Return – Date of Signal NTE long – 103% – 8/17/12 VRNM short – 56% – 4/10/12 CSU long – 45% – 9/4/12 CAMP long – 45% – 4/26/12 ASTM short – 30% – 7/17/12

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.

S&P 500 Adds to Gains as Volume Rises Across The Board

IBM weighed heavily on the Dow Jones Industrial Average today helping keep the index in negative territory while the S&P 500 and NASDAQ close in the green. Volume on the exchanges was heavier across the board thanks to earnings trading from INTC and IBM. Both stocks were able to find buyers, but failed to get back into positive territory. More trouble for leading growth stocks in the after-hours session with MLNX and ALGN disappointing the street. Banks and homebuilders continue to be the leading sectors of this market in our new uptrend. We have mentioned before with the Federal Reserve propping up the mortgage market thru its mortgage backed QE forever program it is going to help the banks and homebuilders. While this may be good for banks and homebuilders leading growth stocks continue to get hurt. MLNX and ALGN are just two examples where growth stocks are simply not in favor in this market. AAPL a bellwether growth stock remains below its 50 day moving average. A new iPad Mini may help sales, but for now buyers aren’t jumping head over heels for the stock. QE trading is supposed to lift all boats, but for now just the banks are benefiting from the program. Today marked day 3 of an attempted rally. BWT Model is back in buy mode after Monday and Tuesday’s action, but for those who follow IBD methods we have yet to confirm a new uptrend. Thursday will mark Day 4 when we would see the market confirm a new rally. We’ll need to see volume swell above the previous day and strong price action. Despite the lack of IBD confirmation we are paying close attention to the stocks that are leading. Leading growth stocks are having their trouble here and it is a sign slower growth is upon us. Stick with stocks that are leading.

Nasty Selloff Hits Stocks Thanks To Misses By GOOG And CAT; Overall, There Is Not That Much Damage

Some big misses by two heavyweights weighed heavily on the indexes as the stock market suffered its second distribution day in as many days. GOOG and CAT were both nailed with 8% losses before the opening bell, after both issued poor earnings that missed estimates. However, as the day wore on neither of these issues saw much more selling and both found solid support at their 50 day moving averages, giving some comfort to the bulls. But, for the day, the damage was done.

The DJIA fell 1.1%, the SP 500, Nassy, and NYSE fell 1.2%, and the SP 600 led the way down with a 1.7% loss. The great news was that leading stocks, in the form of the IBD 100 only lost 1.3%, outperforming the SP 600. However, the losses were a bit worse during the day, so the fact that the indexes closed off the lows is a slight positive. Combine that with Wednesday’s action where the Nassy actually closed higher than the open and you can see we have two distro days that aren’t very powerful.

The higher volume in the market combined with breadth 3-to-1 negative on the NYSE, 11-to-4 negative on the Nassy, and 27-to-3 negative on the DJIA gave the impression that things were really bad out there. However, despite there being 326 new lows there were also 216 new highs which shows that there were some decent pockets of strength out there. If today was really as bad as the indexes looked, trust me, there would have been a lot less new highs. So that gives some indication that the selling was not that bad.

And to go along with the data, two things occurred that really stick out after Friday’s losses. The put/call ratio jumped and closed over 1 at 1.02. That high reading shows that as stocks fell, traders decided to buy puts betting that prices are going to continue to go lower. That in of itself is not that impressive. But when you combine that the options crowd is bearish with the fact that the NYSE short interest ratio is at ANOTHER all-time high you have some real interesting developments. The NYSE short interest ratio is now at 8.25% which is an all-time high!!! That means 8% of trading on the NYSE is done in shorts. This DESPITE THE MARKET BEING ONLY 1% TO 2% BELOW ALL-TIME AND SIX-AND-A-HALF YEAR HIGHS.

When you take all of this combined with some leading stocks like AAPL and ISRG still making new highs and it becomes clear that Friday produced some panic. Markets do NOT top with panic. They top with euphoria. Even though BIDU and GOOG dropped and some are calling for a top via those two stocks, you have to remember that BIDU is still in a solid uptrend and GOOG had a very bullish intraday reversal off its 50 dma. So you are really grabbing at straws if you are calling a top here. Unless you only look at bank stocks and GOOG, there is no way you can agree with that argument.

The rest of the market seems OK. I had only a handful of complete sells and almost all of those were in very poor issues. The partial sales I had were made based on pure discipline. But when looking at their weekly and long term daily charts it is obvious there is nothing wrong with these stocks. Hell, look at one of the best sectors out there Transport-Shipping. ESEA, TBSI, DRYS, and DSX show NO signs of topping and all are still on fire and look ready for plenty of gains. Then you have the clear leader during this current bull market: Chemicals. CF, TRA, TNH, and the other stocks in this sector show no signs of topping. Until you see those two sectors top, along with stocks like MA RIMM AAPL FWLT CME ICE and CROX, you can be sure the market top is not here. You will need to see ALL of these leaders suffer some major distribution and fail there rallies before we can even THINK of a top forming.

For the week, it seems obvious that it was not that bad, with the Nassy losing only .7% and the DJIA losing only .4%. But the SP 500 lost 1.2%, the NYSE lost 1.4%, and the SP 600 lost 1.6%. However, none of these losses were severe considering the run that they have been on this year. It was a wild week with a good Tuesday, bad Wednesday (but great close), great Thursday, and a terrible Friday. But that is what makes this market fun.

The one topic dejour this week was subprime loans. And if you don’t think it is going to get worse, I would love to bring your attention to the bank stocks. If you are an experienced chartist and you know what stocks look like when they top after multi-year runs then you are certainly taking notice at the banks. SINCE ALL OF THEM HAVE THE EXACT SAME CHART!! They are topping. Rather it is MER, C, BAC, USB, JPM, UBS, BBT, GS, LEG, LEH, BSC, WB, or SBNY it doesn’t matter. These stocks are rolling over on MASSIVE distribution that has been playing itself out ALL YEAR LONG. That is why you see ALL of those big tall red bars where volume is during 2007 in ALL of these stocks. That is why ALL of them are rolling over. Unless these stocks get a HUGE bid right here, these charts are setup for some shorts to make a lot of money. These daily or weekly charts going back to late 2002 is just what ALL classic tops look like. This is some massive distribution in the whole sector.

The best thing about this that confirms my charts is that earnings that are being reported are great. Last quarters and the few banks that have released this quarter are releasing some great fantastic learning earnings. However, as all of us experienced investors know, the fundamentals ALWAYS!!! look the best at the top. The current charts are telling us that the subprime and housing market is about ready to start to show up in the books of the financials. What even makes this better is that all of you who read me and do not subscribe to me can watch me RIGHT NOW either help you not lose money or make you money by shorting the financials.

While this is happening, all of your brilliant MBA analyst and big money traders like Joe Capone and Scott Rothbort are telling you that they are bargains on this selloff and that you must buy. Until the “smart” fundamentalist and analyst start issuing sells in this sector, you can guarantee these stock aren’t going to stop falling. When they start issuing sells, that is when you should cover. These dummies just don’t get it and they never will. Yet, you will probably give them your money since they sound oh so smart and have one of those fancy degrees on their walls. These “higher educated” fundamental morons are going to lose their clients some money on the short term. While this “dumb surfer” either helps mine make money or not lose money. If you are long ANY stock in the bank sector and it is below the 50 and 200 day moving average, get the hell out!!!! While you are losing money, you are missing out on stocks like PRGX which make 7% gains on days where the market is down 1.5%. Which stocks are you in? If you are a subscriber to my service I know which stocks you are in.

Back to the market: Despite the ugliness in the financials, I have to say that my leading stocks continue to look great. Even though the DJIA did the 14k breakout and trap (which I eluded that it was going to do that last week) it still remains a strong market in an uptrend with all indexes still above their 50 day moving averages. Earnings season is always a rough one and many stocks are either punished HARD or rewarded handsomely. But with the trend still up, even bad earnings can turn into good so it is not smart to panic if your stock sells off a little after a miss. However, if the indexes cut their 50 day moving averages, leading stock falter, all your new buys start sucking up the joint, and good earnings are treated like bad earnings, then you will have a reason to get defensive.

The possibility out there is for anything right now as it always is in earnings season. This upcoming week we have AXP KLAC MRK X MMM NFLX T DD PEP AMZN GLW and XOM set to report. As it is now we have a lot more disappointments than we are used to seeing but like I have said now 100 times, unless we start to actually selloff and fail rally attempts there is no reason to worry about anything.

Two more points I want to hit before I am finished: The amount of new lows that kept expanding while stock prices kept hitting new highs did hint that Friday was coming. On Wednesday we had a TON of new lows which clearly showed that their was weakness in the market building up to the losses on Friday. So, honestly, this selling should have caught NO ONE off guard. Especially my subscribers. And the last thing is BX. How about that scam stock. What is it now? Down 30%. Can anyone say Refco. This is why you must ALWAYS wait for a stock to trade long enough to create a base. Buying stocks before a proper breakout put you into things like Refco, BX, and IBKR. I use IBKR as my broker. I LOVE THEIR SOFTWARE!!!!! Did you see me buy the stock because of that? Did I buy it because my emotions told me to since I love the company so much? No. Do you know why? Because I am a professional.

If you buy ANY stock for ANY other reason than due to historical analysis and fundamental and technical actions, you are nothing but a gambler. And my suggestion to you is to get your act together or go find a new hobby. People like me are going to take ALL of your money. Why gamble when their is one book out there that can teach you how to fish for yourself? How To Make Money In Stocks by William J ONeil. I know one thing, I sure would not want to feel like the loser down the street that can only invest off of tips. How powerless are you when you make investment decisions off of tips? I know one thing: I LOVE BEING IN COMPLETE CONTROL. And the first step in becoming completely in control is admitting you control nothing. Especially the market. The stock market does not care about YOU or your opinions. Which is, sadly, about all I hear out there in the free chat rooms and on this island.

Aloha and I will see you in the chat room.

PS: This is the last weekend post for the free blog for two weeks. I will be on vacation. For paid subscribers you will still see plenty of me, don’t worry.

top current holdings up this week - purchase date

TRCR 536% - 1/12
MA 241% - 8/2
OMTR 192% - 9/15
IHS 155% - 12/21/05
CKSW 148% - 10/11
ULTR 147% - 10/27
KHD 140% - 5/30/06
DECK 124% - 9/13
PRGX 123% - 1/12
TTEC 120% - 8/25
HRZ 117% - 9/27
CNH 114% - 11/2
EVEP 114% - 11/16
CPA 105% - 9/15
FTEK 99% - 10/6
HURN 99% - 9/13
VDSI 98% - 1/14
IGLD 93% - 10/26
VSR 87% - 6/15
CXW 86% - 5/19/06
NAVI 79% - 12/18
APLX 77% - 9/28
INNO 74% - 6/4
HURC 73% - 12/18
FSLR 72% - 5/22
TESO 70% - 2/16
LFL 66% - 12/13
AFSI 65% - 4/12
TASR 64% - 6/6
CRNT 63% - 5/21
SNDA 55% - 12/26
NTLS 55% - 1/30
IMA 55% - 8/2
XRA 50% - 5/24

Market Commentary At Big Wave Trading Bronze Level One

New Swing Longs: Silver Level Two

New Swing Shorts: Silver Level Two

Stocks On My Watchlist: Gold Level Three

Complete Profits/Losses: Gold Level Three

Partial Profits/Losses: Gold Level Three

MauiTrader Forums: Gold Level Three

MauiTrader Chat Room: Gold Level Three

Longs Up On The Day: Gold Level Three

Shorts Up On The Day: Gold Level Three