Home Prices Jump as Stocks End in the Green in Extremely Light Turnover

Early morning economic news did help the market at the open. However a disappointing consumer confidence, Richmond Fed, and New Home sales figures did halt the enthusiasm. Europe continued to remain in no man’s land with Spain leading the market lower. If I had to make a guess the IBEX 35 would be the next stock index to see a major break lower. The FTSE MIB may not be that far behind. Back here in the States the story of the day is the extreme light volume as the Dow hits all-time highs. There simply isn’t the institutional interest in the market here despite the bulls CNBC parades out on their sets. A last minute push from the buyers pushed the markets to the highs of the session. The Dow once again led the way with Small caps lagging behind. We can debate the validity of this market rally because of QE or we can simply just take the gains. It is up to you. I’d rather take the gains and have an exit strategy. SPLK gave up majority if its breakout gains from yesterday. Volume was well above average and this type of action has become the norm as of late with breakouts. LNKD has tried to continue to hit new highs, but has struggled as of late. FLT has been able to escape the reversal fate and continues to act like a true big wave trading stock. The market is not making it easy hanging onto these stocks, but if you stick to a rules based trend following system you’ll avoid pitfalls. Volume was once again lower on a day where the markets close in positive territory. At this point you could simply ask if volume is higher or lower and you’d know whether or not the market was up or down. QE has certainly thrown a wrench into the markets, but it has certainly pushed away volume. Sure option volume has jumped, but it has not replaced the volume lost since the Fed’s printing began. Price is number one in our books, but it does beg the question will volume ever return? We remain in an uptrend and will continue to stick to the long side.

The Fedral Reserve Rate Announcement Fails to Lift Stocks

There wasn’t much anticipated from the Federal Reserve today, but there was hope something may hit the wires impressing the market. New Home sales were slightly better than expected reaching a new high. However, nothing impressed the market at all and was unable to hold the morning gains. It is pretty pathetic when the market is unable to hold gains for one day. We remain very weak and in a sell signal and technology earnings continue to disappoint. Despite Buffett’s cheer leading for buying on the dip we continue to remain in weak price action. The fiscal cliff is just one issue facing this country. Many will point to the spending cuts and tax increases causing short-term pain for a fragile economy. However, the short-term view versus long-term view should be discussed. How long can we kick the proverbial can down the road? At some point we’ll need to have revenues exceed expenditures to pay off the debt and it won’t be fun. Another issue is capital expenditures or CAPEX. CAPEX spending continues to decline as the view of the future continues to be clouded. Firms are not spending their cash because they have zero visibility due to the current market environment. The Consumer is still deleveraging and corporations aren’t spending will not spell out a pretty picture for profits. Volume ended the day higher on the NASDAQ as the index continues to struggle. On the bright side of things the index remains above its 200 day moving average. Tomorrow the index will have two big components report: AAPL and AMZN. Both stocks do not look healthy at the moment and have pulled back from recent highs. We are not about to guess how these two stocks will react, but we do know when they do will affect the NASDAQ in a big way. AAPL is one of the most over-owned stocks. Many mutual funds and portfolios in general have large positions in the stock (12-13%). The exit door will be mighty crowded if holders begin to flee. Tomorrow is a new day, but what we know now is a very weak market action in the 4th year of a bull market (March ’09 – Now). Cash is king.

Stocks Slide as Volume Slips

Jobless claims and New Home sales disappointed setting a negative tone for the entire trading day. Federal Reserve President Bullard did not confirm a new quantitative easing program, but gold and silver still jumped higher. The two precious metals are certainly trading like there will be another easing program. Buyers did try to get the market higher before the lunch hour, but they did not have enough ammo to push the market back into positive territory. Tuesday’s high remains a road block for this market we have moved lower on lighter volume. Today was a consolidation day, but it is time for institutions to step up and support this market. The continued move in the precious metals has been quite impressive. What it all means is really anyone’s guess. An educated guess would be the metals are moving because of a new easing program. What about a lack of confidence in the US Dollar? ECB bond buying? We can certainly make up plenty of different reasons for the move. However, are you busy worried about the why rather than just getting aboard and taking advantage of the run? The “why” always comes, but we aren’t about to wait and waste an opportunity for gains. Sentiment has shifted to be in the bulls camp. AAII survey showed the amount of bulls jump to 42% the highest for this recent uptrend. Bears slipped to 26%, but many remain on the sidelines. 42% is not at an extreme level and anything above 48% would be considered extreme. 26% is low, but for bears anything around 20% would be too considered extreme. Current sentiment really only highlights the neutral nature of the survey respondents. This weekend will be the last weekend before the office end of the summer season. Make sure you get out there and enjoy the last of summer. Remember, know your entries, position size, and your exits.