Big Cap Technology Stocks Hold Back Stock Gains
July 19, 2008 | Leave a Comment
After the bell Thursday MSFT and GOOG missed expectations sending both stocks lower after hours. Come Friday little had changed as these two gigantic technology stocks weighed heavily on the NASDAQ. AAPL joined the fun and ended lower on slightly higher volume. Options expiry failed to inspire volume to rise, it certainly gave the impression traders were simply not around for the trading session. Stocks finished off their lows on lower trade and was a quiet day overall for the entire market.
At Big Wave Trading, we feel this market is not our new bull market. With that said, we are finding some stocks that are setting up nicely and starting to present opportunities to make money. In the grand scheme of things we aren’t in an environment where we are going to grab our 1000%+ winners. Therefore, we are keeping our cash levels high and, new trades small, taking profits quickly, and (THE MOST IMPORTANT THING) cutting our losses (keeping them small).
We continue to see market pundits believe we have bottomed in financials. However, this was stated back in September ‘07, Jan. ‘08, March ‘08, and again now. When will we bottom? Here at Big Wave Trading we only care when we know our new bull market is here. At the moment the VIX, VXN, NH to NL ratio, and lack of a follow through day tell us we are not there yet. The real big tell is that we are not seeing as many stocks come through our market scan as we would normally see in a bull market. Stocks simply aren’t ready to make a giant leap forward. Until they do, we’ll be cash heavy read to pounce on the new opportunities.
Gamblers Need Not Apply
July 19, 2008 | Leave a Comment
I am in the belief that we have not seen our ultimate lows in the market. We have not seen the type of capitulation selling you typically see at the market’s lows. VIX and VXN continue to show the lack of fear in the market to show a real turn in market direction. If you are a gambler, step away from the market. This market is one for the birds and will present little (slim odds) upside potential. Gamblers will look to place abnormal risky bets using far too much capital placing them at risk to be wiped out. When the market is presenting such small odds for winning trades it is best you step aside and let it self work out.
The worse trait to have as a trader/investor is the gambler mentality. All the greatest speculators in the world knew how to cut their losses and avoid trendless/bear markets. Our current bear market is one that should be avoided all together. IBD research has shown that Monster Stock gains arrive when we are at the beginning of a new bull market. Why not use this research to our advantage and get a large cash position. We can still find some stocks that are setting up nicely in a bear market but our odds are not as great as if it were a bull. The key is to take profits a bit more quickly in bear markets and make sure you keep your losses small! Not only will you see gains in your trading but you’ll be well capitalized for the next Bull Market!
Thoughts on VIX and VXN
July 14, 2008 | Leave a Comment
I just wrote my daily commentary over at my blog and included a blurb about the VIX and VXN. Here it is:
“VIX and VXN continue to be “low.” I had the opportunity to speak with an individual who had graciously share that some large institution was handling a large quantity of employee options. There is a debate if the VIX/VXN have sufficiently signal a bottom. Afterall, both have moved almost 100% off their May lows wouldn’t that show enough fear? One explanation that was given to me was the large, LARGE amount of employee options that had hit the market forcing this large institution to sell volitility (vol). What this creates, a low VIX and VXN. Therefore, if this large institution was selling vol than VIX and VXN have moved sufficiently because the indexes are “artificially” low. But, in my experience if a financial instrument are “artificially” low or high they tend to OVER correct on the other side. In this case, VIX and VXN aren’t sufficiently pricing in fear and will overshoot at some point. The bottom line, we haven’t seen our ultimate lows leading up to a new bull market and we should continue to wait patiently on the sidelines.”
I think it is important here to note that when anything is held down artificially it will over correct to the other side.
Dow Follows Through; Issues Remain
March 21, 2008 | 1 Comment
IBD has called Day 8 of the Dow Jones Industrial average a follow-through day for the market. This ultimately confirms the most recent rally attempt. It takes only one index to follow through to confirm a market rally regardless if any other index takes out its most recent low.
I am not as bullish in the short-term has Joshua however, I do believe we could see a rally. Ultimately, I do believe that this rally will fail at some point in the near future. New Highs are not turning around, New Lows continue to dominate and the number of stocks above their 200dma continues to be lower than stocks over their 20dma and 50dma. Ideally, you want to see more stocks above their 200dma. This would suggest that a long-term uptrend is in place.
Although we are in a confirmed market rally, there still remains the high risk of this rally failing. Cash is King and longs should be kept small.
Brokers and Mortgage Lenders Dominate Trading
March 19, 2008 | Leave a Comment
Are you excited that the group leading Tuesday trade was the beaten down stocks? Oh yeah, the leadership we do not WANT.
Volume and VIX continue to show that we may not have seen our ultimate lows. The drop in the VIX yesterday tells me the willingness for the market participants to believe we have bottomed. This is very dangerous and toss in a lower volume massive rally. It only spells trouble for those who throw their eggs into this market’s basket.
The Easter Bunny is not always so nice.
Market Speculator
Possible Stagflation?; Stocks Lose Ground On Higher Volume, Giving The Market Its Second Distribution Day
April 12, 2007 | Leave a Comment
Stocks started the day weak on the back of data from the NAR announcing that they expected existing home sales to fall in 2007-the first drop in 38 yrs-and also see lower existing and new home sales in the short term. That combined with higher gas prices weighed on stocks early. But once again the dip buyers showed up and started to bid stocks higher. That was until the Fed March meeting minutes came out at 2pm. That promptly sent stocks to new lows on the day before they received a minor bid into the close. Read more
Stocks Rally Again And Close Near Their HOD, On Stronger Volume; Volume Well Below The 50 Day Volume Average
April 11, 2007 | Leave a Comment
Stocks performed the same way as they have been recently, with the markets gapping up, selling off, and then finding dip-buyers to help bring them off their lows and sending them near their highs by the close. All of this happened despite a very healthy amount of bad news from the housing and mortgage industry. Almost half of my links that I received today involved stories about the housing and lending markets. However, stocks digested the data and did what they have been doing recently rallying the rest of the day. Read more
Stocks Revert Back To Old Ways; A Day Of Back And Forth Meaningless Trading Ends With Stocks Slightly Higher On Lower Volume
April 5, 2007 | Leave a Comment
Stocks went back to their old ways of not doing much intraday but boring us to death, after a few important economic numbers hit the wires. The ISM service index fell to 52.4 in March from 54.3 in February. Expectations were for 54.7, so obviously this was not good news. The prices paid index rose to 63.3 in March from 53.8 in February, indicating inflation is still very real. Also, according to the Census Bureau’s factory orders, orders fell 1% in February after being down 5.7% in January. These numbers, overall, were very weak and not bullish. However, the market managed to put in more gains despite these poor economic numbers. Read more
Bullish Intraday Reversal, Helps Stocks Avoid Another Possible Ugly Day; Stock Indexes Close Higher On Lower Volume
March 29, 2007 | Leave a Comment
A bullish Q4 GDP final revision higher to 2.5% from 2.2%, along with jobless claims falling for the fourth week in a row, helped start stocks off on a very bullish foot before the opening bell. But soon after the opening bell, stocks trended lower all day until a strong late afternoon rally sent stocks up into the closing bell with the SP 500 even closing near its HOD. This reversal in the face of rising oil to six-month highs of over $66 a barrel and gasoline future to eight month highs at $2.1355, due to the tension between Iran and the free-world, has to be considered very impressive. Read more
Stock Indexes Close Lower On Higher Volume, Producing The First Distribution Day Since The Follow-Through On Wednesday; Is This Rally Done Already?
March 29, 2007 | Leave a Comment
Stocks turned tail Wednesday and for the second day in a row dip-buyers did not show up as stocks moved lower, with an intraday roller-coaster ride mid-day after a speech by Ben to a Congressional panel, closing near the lows of the day. Things got off to a bad start, after the February durable good came out below expectations of a 3.5% gain with an actual 2.5% gain. That might have been bad but the ex-transportation numbers hitting YOY growth lows not seen since 2003 and capital goods coming in 1.2% lower and at lows not seen since 2004 were probably what really gave traders a scare. On top of that, add oil hitting six-month highs of $68 after-hours and settling in at $64.08 after weekly inventories were announced falling by 900k, comments by Ben that inflation is still a worry, and the tensions between Britain and Iran over the naval incident and you have plenty of reasons for stocks to go lower; and lower they went. Read more
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