Stocks Advance in Heavy Trade as the Month of May Concludes
May 31, 2011 | Comments Off
Over the weekend IMF and other world leaders came together to help fund another Greek bailout giving a boost to the futures. However, the news of a possible Greek bailout quickly fizzled after the market digested less than stellar (terrible) economic data. Manufacturing data was the weak spot even as home prices fall more than expected. Case-Shiller report is signaling the housing market has further to go on the downside before recovering. Traders weren’t impressed and brought stocks to their lows of the day with volume running hot. By mid-day it appeared any rally would not work out, but buyers had a different tale to tell by the end of the day. At the close, stocks finished just off their highs with volume coming in hot.
Now the debate will be whether or not today was a follow-through day or not. In our eyes, today was a follow-through day due to price and volume action despite the flood of volume the end of the day. Volume at the end of the day poured in as end of the month as funds shuffle positions around. Even with the shuffling at the end of the month prices gains were solid before and we’ll stick to the market following-through. Remember, stock market trading depends on a prudent disciplined approach. It is uber-important to stick to it.
Stocks Find Support as Volume Jumps
May 25, 2011 | Comments Off
Starting the day off with economic news did not sit well with the market. Durable goods suffered a wider than expected drop perhaps signaling further weakness in manufacturing seen from earlier reports. Volume started the day off much heavier than Tuesday’s action, but the run rate did fall off from the highs of the day. At the end of the day volume did eclipse Tuesday’s level showing institutions were more active today. Price gains were solid, but a weak close continues to leave a black smudge on the chance of a new uptrend. We are bumping up against heavy seasonality resistance putting the chances of a new solid uptrend in question. However, today’s action was a step in the right direction.
We still remain cautious here, there are a few leaders coming back and we could see a tradable rally over the next one to three weeks. Sentiment got overly bearish, but that does not guarantee this market turns into a rip roaring new uptrend like we saw in September of last year. Unfortunately, May and June follow-through days SELDOM work and that does not bode well for this current market. It would be better to see this market go into correction mode correcting 20-25% over 3-6 months. However, what we want and what we may get WILL be two different beasts. Therefore, we’ll take what we can get from the market.
Weakness Permeates Throughout the Market as Stocks Close Near Session Lows
May 24, 2011 | Comments Off
New home sales jumped more than expected but it was the data out of the Richmond Federal Reserve Bank that shook up the market. The manufacturing index flashed a negative reading well below the expected reading showing manufacturing is slowing significantly. Traders took to the market selling down the market as buyers are on a strike. Sell in May and go away continues to plague the market and now with the NASDAQ firmly below its 50 day moving average the market is at risk for further price destruction.
Today’s close certainly was less than ideal as the last half hour saw the NASDAQ drop 10 points. Weak closes are a signal the market is under distribution and prices will be coming down. The market remains in extreme oversold conditions and a bounce is likely here, but any bounce without massive volume will be sold. It would not come as a surprise for the NASDAQ to run back towards its 50 day moving average before we begin to see some major selling.
Another reason for a bounce would be an overwhelming amount of bearish sentiment. Last week the number of AAII Bears outnumbered those who were bearish as the Japanese crisis unfolded. This does not guarantee a bounce, but it does signal the possibility a snap back rally to shake out weak shorts before resuming the downside move. Remember, we are in the third year of a bull market and the third year tends to be VERY CHOPPY. Have we had a big top? Perhaps, but we have a very weak market in front of us and it will be some time before we get a respectable move higher.
Debt Worries Plague the Market; Stocks Fall
May 23, 2011 | Comments Off
The Euro Zone continues to be plagued by debt woes as many Euro nations cannot come to grips with reality. Therefore, fear of a pending collapse, traders rushed to sell stock. The market did appear to find some footing after 12 pm EST hit rallying to its highs just after three o’clock, but the rally wouldn’t last too long. Sellers once again took the chance to take down the market, but avoided closing at session lows. However, it remains clear we are not out of the woods and lower prices are in store for this market.
Last week we saw some signs of life in the market, but Friday’s action stomped on the idea this market could rally. While there are some pockets of strength the overall market isn’t in the position to rally just yet. In fact, it is most likely the opposite. It feels like the market is going into the 2008 mode where we slush around these levels only to suffer a severe setback in the fall. Seasonality plays a big part here as we are running into unfriendly ground in terms of the calendar for the market. Summer months tend to be low volume muck sessions and likely will not produce a meaningful bottom. August is a month where we could see a potential setup like last year, but being in the 3rd year of a bull market all bets are off. Cash is king and will remain king (unless we get short setups) until we see a proper follow-through day.
Last summer the market corrected just over 3 months and from top to bottom corrected roughly 19%. This was long enough and deep enough to produce a very nice rally from September till a few weeks ago. In the mid to late 90s we saw the market correct more than 20% a few times producing VERY powerful moves. To give some context the NASDAQ would have to correct to 2310 to put in a 20% correction. We can play “where could the NASDAQ end up” game, but it truly is worthless. We know the signs of a market bottom and will be on top of our game when it does occur. For now, cash is king and your stock market trading life will depend on your ability to protect your capital.
Disappointing Economic Reports Fail to Bring Down Stocks
May 19, 2011 | Comments Off
The market digested a few economic reports, two being very disappointing yet the market was able to hold up. Leading indicators dropped to -.3% the first negative reading since last June and worse yet Wall Street expected a positive reading of .1%. To piggyback on top of the Leading indicators was the reading out of the Philly Fed index was disappointing showing manufacturing fell in the Month of May to 3.9. Wall Street expected the index to show a reading of 20.0, it appears the economy continues to be weak. Jobless claims came in better than expected, but continues to run above 400,000. Despite all the negative news from economic reports the market was more focused on LNKD stock than economic conditions.
There was a ton of hype heading into LNKD stock first day of trading. IPOs are always a mixed bag, but this was the first social networking stock to hit the market. At points during its trading session the stock traded more than 1400 times earnings! It reminded a few of the good old days of the late 90s where IPOs would rocket higher after coming public. We’ll see how LNKD stock reacts to the rigor of stock market trading, but for now we’ll be patient for the stock to form a base.
Stocks Bounce in Weak Fashion; Volume Falls
May 18, 2011 | Comments Off
The attempted rally continues with the NASDAQ jumping 114 basis points, but the red mark was volume coming in sluggish fashion. Leading stocks did their best to bounce off support levels, but there wasn’t a big push in many names. While today may have been an aberration, it does not instill confidence this rally attempt has much steam left in it. The only economic news of the day came from Mortgage Applications jumped 7.8% due to refinancing. At this point, this is merely an oversold bounce with weak volume.
Volume is key signal here as we’d be more bullish if institutions got behind today’s move. Volume was down more than 10% on the NYSE and more than 16% on the NASDAQ. I would have accepted if volume trailed one or two percent, but double-digit is something to take notice. Institutions were simply not actively participating in buying up shares today. They very well could operate on the buy side tomorrow, but for now they are not buying into this market bounce. The most likely scenario will be institutions selling into this rally sucking in eager dip buyers.
The NASDAQ has been able to hold onto its 50 day moving average, a positive signal for the market. Today was day two of an attempted rally and we could still see a follow-through day occur over the next week or so. While the market has never rallied with out a follow-through day many do fail and it would not surprise me even if we were able to muster a follow-through day it would be sustainable. Unlike September 1st, 2010 this market isn’t coming off a multi-month, double digit % decline correction. If so, I’d be more bullish on the opportunity to make money on the long side of the market. For now, we’ll respect it, but I would not hold my breath for this market to continue higher.
NASDAQ Bounces on Oversold Conditions as Volume Continues to Swell
May 17, 2011 | Comments Off
Weak economic data kicked started the day with Housing Starts dropped more than expected in the month of April. Sellers rushed to dump stocks after the 10 o’clock hour was underway sending stocks to their lows. However, this push was sent the market well into oversold territory setting up a late afternoon recovery. Leadership continues to look very unstable and the selling over the past week will take time to repair. This market remains in correction mode and two to three day bounces are to be expected from this market. When the market becomes too obvious it is wise to be a contrarian.
We did see a few leaders find support at key levels, but there weren’t enough to get excited over today’s move. Technically speaking today is Day one of an attempted stock market rally. Due to the green close, albeit 3 basis points higher we can say this market is going to attempt to rally here. We are in the camp we are going to see bounces short-lived, but anything is possible and we’ll respect the market here. However, all signs continue to point to this market rolling over and making it a fun-filled summer.
NASDAQ Drops Hard as Leadership Stocks Fall; Volume Rises
May 16, 2011 | Comments Off
The most important indicator of the day was the nasty selling seen in Leadership stocks. Market leaders are the number one-tell in a market and ignoring them is doing so at your own peril. NASDAQ led the entire market down today closing down 163 basis points with the Russell 2000 index not far behind (down 153basis points). Volume rose across the board indicating institutions were out selling stocks and selling the leaders. A big warning sign going forward. The S&P 500 and Dow Jones Industrial Average were able to hold up, but I wouldn’t hang my hat on these laggard indexes. Red flags and warning sirens are going off from the market, are you going to listen?
Big stock leadership like NFLX, AMZN, BIDU, AAPL are telling a story (there are a few more, but why pile on?). They are, Leadership stocks foreshadowing further selling in this market over the coming months. Remember, the market CAN rally a day or two, but for now this appears to be the beginning of a deeper correction. A bear market could occur here and the likelihood of this occurring appears to be VERY HIGH. Leading stocks ALWAYS tell a story of the market that is to follow and it is up to you whether or not you are going to listen. With that said, we are going to be operating on the short side of the market. However, cash is an acceptable place to be. Waiting the storm out isn’t such a bad idea, but for those who can and are willing to short we have a great opportunity ahead of us.
Stocks Rally Behind Growth Stocks and Small Caps
May 11, 2011 | Comments Off
Small cap stocks along with leading growth stocks helped boost the market. The market felt sluggish for most of the day after 11am EST. It appeared as if sellers sat at the high of the day knocking down the entire market. However, just after 2pm EST stocks caught a bid and blasted through the previous high of the day vaulting to the high of the day. Sellers were simply over-powered at the 2 o’clock hour. Volume had been running higher throughout the entire day as institutions were active in the market. Volume on the NASDAQ ended above its 50 day average showing there was power behind today’s meeting. Today’s move indicates this market has a bit more legs.
We have some powerful setups occurring in great growth stocks a good sign for this market to continue higher. The important part is whether or not you will be take advantage of the situation. Despite any bear arguments, many of them very logical the setups we have out there simply render them useless. Price and volume rule the day with growth stocks and we aren’t about to ignore them simply due to an opinion. At some point we’ll see a big bad bear market, but for now we’ll stick with the leaders.
Commodities Tumble; CSCO Stumbles in After-Hours
May 11, 2011 | Comments Off
“The market giveth, the market taketh”
Yesterday’s rally appeared to be a follow-through from Monday’s low volume rally, but the market gods had other plans. The trade imbalance widened more than expected suggesting the US’ rising exports did not gain enough to outstrip imports squashing hope on a manufacturing rebound. However, a pull back was to be expected after Tuesday’s gains and the NASDAQ was showing signs of life in the early going. The big story of the day was the conviction of (scumbag) Raj Rajarathnam on all accounts. It was a big win for free marketers, but we are still waiting on Bankers to be convicted of fraud stemming from a decade of exuberance. Despite this being positive news commodities began to sell –off and hard dragging stocks down with them. The market was able to recover somewhat even with CSCO stock reporting in after-hours. Today was a signal all is not right in the stock market and yesterday was more of an illusion than the real thing.
The great thing about our position is we cut our losses when things do not go our way. Many will hold on to dear life only to see their positions crush their portfolios. While there are a few areas of hope, or positive light there is just too much darkness in the market. Yesterday was merely a headfake and now it appears this market is likely to chop and slop and more than likely roll over in the days and weeks to come. It is unfortunate situation as going long is MUCH more fun than shorting or going to cash. But, this is an important time to stay on top of your ready list. Make sure you keep it up to date with stocks displaying positive action and SUPER strong fundamentals. When this market does turn, you’ll want to be on the forefront with cash in hand to take advantage.
