Stock Indexes Put On A Show With An Amazing EOD Rally; This Was A VERY GOOD Week
May 31, 2009 | Comments Off
By Market Speculator
Wrapping up the week the NASDAQ closed out the week breaking out from a consolidation period in higher trade. Friday’s close was a positive step for the market as accumulation days are beginning to pile up on the indexes. We are also beginning to see the rise of quality growth stocks; emerging from the most recent consolidation period. It will be most important for the market either to push higher or continue to build positive sideways action.
The most important aspect of the market is the price and volume action. Nothing trumps it and should be the number one indicator in your arsenal above all else. It is quite simple: price and volume is the summation of all the actions taken by market participants. Regardless of the their reasons their actions are captured in the price and volume of a stock and the entire market. Ignoring this important signal will severely impair your ability to extract gains from the market.
Investors Business Daily’s William O’Neil’s studies of the market found that no uptrend in the history of the stock market ever began without a follow through day. We have certtainly seen failures of follow through days, but the true beauty of it is that you will never miss an uptrend without it. Looking back at our March 12th follow through day on the S&P500 we can see the market fell roughly 60% from the November 2007 highs. Stocks were beatup and we had already seen 3 straight follow through failures. Once again, on balance the follow through day worked just like in the past. Now, leadership was simply junk of the bottom type stocks but noting the follow through day may have saved you from continuing to short these stocks.
Small Cap and IBD Indexes Lag the Major Indexes with Volume Higher Across the Board
May 28, 2009 | Comments Off
by Market Speculator
Those who have been day trading the index futures know today gave many traders whiplash as stocks bounced around for much of the day’s trading session. Intial jobless claims helped the market at the open, but troubling news from the housing put the brakes on and sent stocks lower. For much of the day stocks simply bounced around in lackluster trade. Stocks found it difficult to sustain a movement in either direction showing the epic battle between the Bulls and Bears. It wasn’t until 2pm EST when the Bulls began to win the struggle and pushed the major indexes higher. Crude Oil prices closed above $65 a barrel helping oil related names push higher into the close. Closing in their upper ranges along with higher volume notched a day of accumulation for the market.
On the downside our IBD indexes lagged the entire market. In addition, Small and Mid-Caps were left behind leaving a few dark clouds lingering over the market. We must be mindful of the NASDAQ’s 5 distribution days and 4 distribution days on the Dow. Although we haven’t had any MAJOR bouts of distribution we still have them piled up here in recent weeks. The market is telling us it might not be ready to move higher and will need to continue to be cautious as sideways action may continue for the coming weeks.
Indexes Slide on Mixed Trade as The Nasdaq Marks its 5th Day of Distribution; Fueling the Decline was Treasury Spreads Widening to Historical Levels
May 27, 2009 | Comments Off
By Market Speculator
Stocks took quite the tumble as Treasury spreads widen after fears about the credit worthiness of US Treasuries. The fear is the governments ability to feed the Treasury market with more paper once Obama’s record $1.75T deficit. Although volume was below the 50dma volume did increase on the NASDAQ giving it its 5th day of distribution. I wouldn’t call today a Major Day of Distribution, but it does throw caution to the wind regarding the health of this market. Most likely the biggest question that remains is when cash flees the bond market where will it find its place; stocks, commodities, forex? Wherever it lands, we’ll see it in our charts. On the whole, today wasn’t all that bad and highlights you must be cautious when distribution days mount.
Obviously the biggest scare of the day was US Treasuries. It should come to no surprise that TBT and TLT are foreshadowing some nasty times ahead for the Treasury market. Look for yields to take off as money bolts from treasuries. China, the biggest holder of US Treasuries has been balking at months at buying new paper. If China puts the brakes on you can bet your bottom dollar we’ll see record days in the Treasury market. We could be witness just another bubble bursting and this bubble will have far more devistating effects on the American People.
Finally We Have The IBD Indexes Leading The Way As Stocks Rally On Heavier Trade
May 26, 2009 | Comments Off
By Market Speculator
Stocks defied negative news from North Korea as the rogue country tested its nuclear and missle strike capabilities. Consumer confidence jumped big fueling institutional buying pushing stocks even higher and the buying continued right up into the close. Volume was up across the board compared to Friday’s trade, but it was below the 50dma. Not a terrible sign, but its more showing institutions are still being a bit shy. Rapping up the day, seeing the indexes close out near the highs on volume was a positive step in the right direction.
Finally, we see the IBD indexes leading this market. The trend will need to continue, but today was a step in the right direction. It is nice to see quality growth stocks lead for once and not the junk off the bottom. Remember, in past uptrends which followed severe bear markets leaders took months to form. We may be seeing this begin to take shape as stocks with quality growth characteristics are beginning to take shape. As these stocks begin to show up and present opportunities to get long it’ll allow us to get bigger in a position rather than taking small positions in speculative stocks. This is exactly why we stress keeping the powder dry for opportunties to get long quality stocks.
Other notable positive is news is the number of New Highs hit relative to New Lows. The NH vs NL ratio ran better than a 7 to 1 ratio showing the market continues to have strength from within. In John Boik’s research he found that when the NH vs NL was favorable the probability of Monster Stocks appearing soars. Although I do not trade off of the Nh vs NL ratio it is a simply another secondary indicator that hints at the power of this uptrend.
Stock Indexes End Slightly Lower On Lowest Volume Since The Beginning Of The Year
May 23, 2009 | Comments Off
HAPPY MEMORIAL DAY!
I have scanned over 5,000 stocks this weekend and can honestly say that there are some very nice charts out there. SADLY, those charts are all in the sub-$10 category with most sub-$5. The good news is that there are still a lot of high quality CANSLIM stocks like GMCR, PEGA, NTES, TNDM, HMSY, CMG, NFLX, AAN, JOSB, SNDA, AMT, CRM, EQIX, and ASIA that are moving higher, even if they are not setting up and breaking out of the chart patterns I like. However, at the same time, it is a very mixed market, as stocks like AIPC, ALGT, IDCC, QSII, and DMND have setup and broken out of bases, started to move higher, and then have all disappointed by falling below their pivot points.
This mixed action is common and not surprising after the huge selloff we just went through. A lot of people that are not focused on the cheap stocks and most beaten up stocks basically missed the sweet part of the move higher, but if this market is going to turn into a bull, and not die as just another bear market rally, they will be rewarded as those stocks will be the stocks that produce the largest gains in a sustained bull.
Indexes End In The Red With A Push Off The Lows While Volume Eases Across the Board
May 21, 2009 | Comments Off
By Market Speculator
From the onset the picture looked bleak for stocks as selling appeared to be slightly higher on the NASDAQ but lower on the NYSE. Selling pressure picked up just after 10am EST as the hot money was moving out of stocks. Interestingly enough money was pouring out of treasuries along with stocks suggesting traders weren’t chasing after treasuries. Money was certainly moving into gold and gold related stocks. During the final our of trading we did find support off the lows showing signs the market still has some life left in it. Given the action earlier in the trading session the push off the lows simply confirmed my neutrality on this market.
Gold, Treasuries, and the Dollar are all troubling signs. With Gold moving above 950, Treasurie Yields racing higher and the dollar moving lower is spelling trouble. All 3 items are related and are quite troublesome to watch. The higher the yields on treasury bonds the more costly ALL Government programs become. Utlimately, this burden lies on the US Taxpayer who is already feeling the pinch from the current economic climate. The safe haven is gold and silver as these metals are seen to have intrinsic value. The move in gold will continue as the United States and other Global Central Banks print more fiat currency. Rather than let the market course correct itself we are delaying the natural process a free market provides.
Gains Evaporate as Stocks Notch an Outside Distribution Day
May 20, 2009 | Comments Off
by Market Speculator
Kicking off the morning stocks rose as it appeared buying interest was beginning to pick up. However, the most recent FOMC meeting minutes were looming; set to be released at 2pm EST. Stocks were steadily sold off into the 2pm EST release of the minutes as volume was running hot as it was all morning long. Traders cheered the FOMC meeting minutes initially but stocks hit a road block and selling spread like wild fire on the street. Closing out the day, stocks notched a terrible reversal distribution day and an outside distribution day at that. Although the Dow and NASDAQ currently have 4 distribution days the action in leading stocks is what is more troubling. Today was not a very pretty day leaving a hefty blemish on this move off the March lows.
What is troubling to me is the fact that the IBD 100 fell more than 1% on greater volume. Leading stocks during normal uptrends would not have pulled back further than the major indexes and certainly not on higher volume. We have so few true leaders that it has begun to push me to a more neutral position from a a more bullish scenerio. There are still stocks coming off their lows and making some nice gains but we need quality growth stocks to lead this market not junk-of-the-bottom stocks. I have pointed out that it can take months to form leadership, much like the 1938 market were leadership emerged 3 months after the new uptrend was established. We still have the ability to see some leaders coming into the fray but at this time the window of opportunity is beginning to shut.
Ending in Mixed Fashion Stocks Fail to Close Out With Gains Seen Earlier in the Session; IBD Indexes Take the Lead
May 19, 2009 | Comments Off
Following through on yesterday’s gains stocks took the lead and moved higher as volume tracked higher. A very bullish sign to see stocks moving higher with higher volume especially right after a day where prices advanced on lower trade. All was well and good with stocks until the final hour of trading where we began to see selling pressure. The selling pressure was enough to send the S&P 500 and Dow Jones Industrial Average into negative territory but the NASDAQ was able to slip in a small gain. Preliminary volume indicates NASDAQ saw higher trade while the NYSE declined avoiding a distribution day. A positive sign is we saw IBD indexes lead the market and we’ll await to see if volume on the IBD indexes came in higher. In summary, not a terrible day following yesterday’s move, but signs of bullishness are appearing in the leaders.
We’ve been waiting to see if the IBD indexes would begin to show some light. Yesterday, the IBD 100 was able to see gains on higher volume while other exchanges saw lighter trade. Although it lagged, the volume compenent was important to see. It meant that leading stocks were being accumulated rather than see shorts simply covering. The probability of stock gains improve dramatically when we begin to see growth stocks lead the way. IBD is on the forefront of these stocks and a proven method to capturing these leaders. BigWave Trading is certainly on top of these and ready to pounce given the opportunity to get long leaders.
Shorts Ran For Cover as Stocks Run Higher on Lower Volume; Some Leaders Show Support With Volume
May 18, 2009 | Comments Off
Lacking any economic catalysts to begin the week stocks started the day off gapping higher. Volume tracked lower for much of the day indicating institutional players were sitting on the sidelines staying away from the action. It appeared the action was driven by short-sellers covering their positions. It was certainly disappointing to see volume come in lower on such a large percentage move on the indexes. At this point, a day with gains is nice but at some point we need accumulation to support this uptrend.
Price and volume action is the most, the most important action to consider on the exchanges. The next is seeing how leaders are acting. Leaders are found in the IBD 100 and IBD 85-85. Normally, leaders emerge rather quickly from market corrections. However, this correction was quite severe and from past severe market corrections leadership may take months to form. It should come to no surprise that this market is lacking IBD leadership. At some point, for this uptrend to continue the IBD 100 and IBD 85/85 indexes must be leading this market.
There were some positives today as we did see leaders have an excellent day. A few of them found support with volume. A clue that there is institutional support for these leaders. We are on top of them here at Big Wave Trading and are ready to take advantage of these leaders if they begin to breakout. These leaders will run and show is Monster Stock gains. Not only will they be Monster Stocks but they will be the tell when the market begins to stall out. Junk-off-the-bottom have led this market up to this point but for this uptrend to continue any further we’ll need to see the IBD indexes lead.
After All That Bottom Fishing The Past Two Months It Looks Like CANSLIM Stocks Are Ready To Lead Next; Stock Indexes Pullback On The Week On Lower Volume
May 16, 2009 | Comments Off
Stocks pulled back this week and those that read this commentary daily know that we were expecting a pullback and we are getting it. If you remember I wanted the pullback to come on lower volume and that is exactly what we are getting on the IBD indexes, the Nasdaq, NYSE, and SP 500. If stocks continue to pullback this week, I will be more than OK with it as I think stocks are starting to look really good out there in the charting landscape. If this continues I am sure that we will be moving from trading everything breaking out in uptrends and downtrends and will be able to move on to going long the historical patterns that come about right before stocks go on major advances.
If you are not familiar with these chart patterns, you can find them on the ‘past big winners’ area at my .com site or you can visit the IBD Investors Education site and go over the historical chart patterns that lead to big gains there. If you are a subscriber you can also go all throughout the ‘General Market’ post to find a ton of beautiful chart examples of other past winners that I was not part of but have studied. The bottom line is that if you are a subscriber, you have no excuse to not know a chart pattern. We have example after winning example on the site and IBD’s past studies to look at to know what we need to see before we go heavily long.
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