Stocks Notch Another Low Volume Summer Session; GDP Growth In line with Estimates

No surprise GDP growth was in-line with estimates as pending home sales jumped more than expected. Both figures failed to ignite buying as the market hit the day’s low just before 11am. Once again buyers stepped up to the plate supporting the market. Support wasn’t ferocious as volume registered lower than yesterday’s pathetic levels. Volume just isn’t there during the final week of the summer. Institutions are not stepping up and putting their money to work in front of Ben Bernanke’s speech in Jackson Hole. While the price support is positive it is very difficult to have much conviction in the market in either direction. According to MarketSmith’s shorting data we continue to see the NYSE Short Interest hitting 5 year highs. Are we simply seeing a massive short squeeze? Or is the SMART money right and a pending collapse is about to occur? It is anyone’s best guess here which way the market goes. Quite frankly it is much easier to doubt the market with all the potential headwinds the market faces. China, Europe, and the Fiscal Cliff can easily be used to make a bearish case. Despite the argument and from a trading perspective when do you exit your losing position? How much do you risk? Trend following is powerful because it cuts through the fundamental non-sense and positions you to what matters most: PRICE. With very little happening in the market there have been bright spots and opportunities for BWT to exploit. The last thing we want to do is miss a signal. Missing signals decreases your opportunity to capture upside and why it is so important not to argue with your system. Follow it and do not let your opinion get in the way of your trading. You’ll be surprised how much more success you’ll have by not ignoring trading signals. Remember always know your position sizing, entries, and exits! Cutting losses is your insurance policy and your number one rule!

Melt-up Monday Ends on a Sour Note as Summer Volume Continues

After coming off of an Economic news invasion last week the market gets a reprieve this week. Monday’s have been tough over the last 9 weeks closing in the red all 9 times. This Monday would be different closing in the green, but well off the highs of the session. The NASDAQ backed off the 3000 level while the S&P 500 reversed from 1400. While these are just psychological levels the sell off at the end of the day was not ideal. We’d like to see the market close strong on heavier volume. At the moment this market appears to be hyper focused on index securities and driven by high frequency trading. Our uptrend continues, but remains very weak with the lack of volume coming into the market. Friday’s market action was solid when you take a look at price action, but falls down when you take into account volume. We can continue to move higher, but there isn’t ANY accumulation in the market. Institutions are not accumulating stock at this time and it is very apparent when you look at volume. Without conviction we remain cash heavy in this market environment as it is difficult to have confidence to get size in any position. Trading with small positions here is key until the market says otherwise. It is quite amazing Mondays have been so dismal, but the market has been able to avoid taking out the lows. Since the last positive close on Monday the market was coming off the June lows, not highs. While it would be fun to speculate the market is about to change its behavior and move lower we will need price to confirm our stance. We have seen this market melt-up on pathetic volume and saved by possible central bank action and it would not surprise me to see another shock come into the system. How can the market rally in a sustained meaningful way when the VIX is sitting around 16? Anything can happen but logic says otherwise. It is very important to keep focused on being disciplined and sticking with your strategy. We are sticking to ours and look forward to when we have better market to operate in. The most important rule remains cut your losses, when you are wrong.