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.

NASDAQ Breaks Six Day Losing Streak; C Jumps more than 5% on Earnings

The market finally bounces from oversold conditions as volume ends mixed. Volume rose on the NYSE and NASDAQ exchanges, but SPY and QQQ volume remained light. Retail sales jumped more than expected helping set the tone early on. Sellers got the upper hand on the NASDAQ, but were quickly turned away as stocks zoomed higher into the close. Price gains were solid and although we did not see the overwhelming volume associated with institutions supporting the market. Today was day one of a new attempted rally on the NASDAQ lead by banks. Banks lead the market today on the back of Citbank’s earnings with the stock gaining 5.5% during the market session. WFC continues to suffer from its earnings report, but other big banks continue to act well ahead of earnings. GS, BAC, and JPM continue to act well and are poised to move higher. When the Federal Reserve will be buying mortgage securities from Banks it is hard to fathom the Federal Reserve will pay anything but the highest price possible. So far, the only group to benefit from QE Forever will be the big money center banks selling mortgage securities back to the Federal Reserve. We were bound to bounce from the selling we saw from last week. The NASDAQ was down 6 days straight and it is quite normal to see the market rebound. There is no way to know whether or not this will turn into a new uptrend or a one day wonder. We’ll need to see confirmation of a move higher before we get excited over one day’s action. We remain in neutral mode and until price action and leading stocks say anything different we’ll remain neutral. There is just 22 days left to the election is over and it cannot come soon enough. As soon as the election ends the fiscal cliff topic will be one in focus and one the market will grapple with and hopefully produce a trend. Today concluded day one of an attempted rally and we’ll be waiting for confirmation one way or another.

The 4th Quarter Starts in Lackluster Fashion

NASDAQ 100 stocks lagged the broader market lead by MSFT and AAPL as the Dow Jones Industrial Average and Russell 2000 were able to close in the green. Volume ended the day lower than Friday’s inflated figures from end-of-the-month rebalancing. Overall the session wasn’t that inspiring, but it wasn’t entirely awful. Early on in the session optimism ran high with positive news from the ISM Manufacturing Index report showing the sector expanded when expectations were for it to slow. Price paid were a bit higher, but weren’t alarmingly higher. The close was decent with buyers stepping up and lifting the markets avoiding closing on the lows. Our uptrend remains with very little distribution piling up despite the bearish opinions of the market. Today’s reversal is not what you want to see from the market. Last year, however, the first day of October was not that great either. Even the second day, 10/4/2011 at 3pm looked dire until we got a rumor of a new bailout for Europe. While things may look dire now you just never know what the market will hand you the next day. Guessing where the market will be next is not a recipe for success and continues to keep traders from maximizing potential gains. Stick to a disciplined approach and play the odds rather than simply guessing. The election is not far a way at all! It will be nice to get away from the constant stream of political ads and banter. However, for this market it does appear we are looking like an Obama victory. We can debate polling tactics and have yet to have a debate, but there is one thing that is certain: no one knows where the market is going. Will Obama help the US avoid the mandatory spending cuts and tax hikes? Will Romney? Will either candidate get our fiscal house in order? It is very doubtful either candidate will resist the urge to spend and inflate the deficit higher. Then again, the Federal Reserve is pumping $40 billion a month into mortgage backed securities and it won’t matter. In the end, focusing on leading stocks and their price action is the way to go. Leave the guess work to others. We aren’t off to the best start to the quarter, but it could be far worse. Cut those losses.