Joshua Hayes'  Instablog

It all began in Japan where the Nikkei hit an all-time high only to end its day lower down by more than 7%. Selling swept the globe where Europe was hit hard, but it was the United States market to see some resiliency. A better than expected Jobless Claims figure did help the mood, but it was likely to due to the larger than normal POMO from the Federal Reserve. More than $3 billion was pumped into the market from the Fed and was likely "the" catalyst pushing stocks off their lows. At the open the market hit pretty extreme oversold readings and the move off the lows is not all that surprising. Volume was lower on the day even with the lower open. Institutions weren't all that excited to jump right back into the market. Our uptrend was hit, but it is still standing.

Yesterday was a great example of why chasing stocks well beyond an acceptable price is dangerous. But, panic selling is just as dangerous. Plenty of stocks gapped lower like DDD to only close much higher displaying excellent strength. Reacting with emotion will not get you anywhere but heart ache city. Avoid making costly mistakes and join Big Wave Trading! We'll steer you clear of making mistakes. Get on board.

Sentiment from inviduals jumped to lofty levels, but away from their most extreme readings. II Bulls hit 55% an extreme reading, but AAII Bulls only registered 48.97%. Near 50%, but still below the '13 high as well as '12, '11, and '10. AAII bears slipped to a new low for the year at 21.58%. However, it is still well above the readings seen in '10 and '12. We were at lofty levels, but we simply cannot declare a market top without further evidence. That evidence is price and market leaders.

Anything is possible in the game we call the stock market. April we had piled up quite a bit of nasty distribution days and we were able to climb out of it. Will this time be any different? Perhaps, but we we aren't going go out and declare a top. It boils down to price trends and your process to take advantage of price trends. We are sticking with our process. Cut your losses and ride your winners.

Disclosure: I am long DDD.

Void of economic releases the market did get showered with more than $3 billion in asset purchases from the Federal Reserve. A hiccup in the morning was quickly support as the Federal Reserve Open Market Operations flooded the market with fresh new cash. Over Europe the DAX closed in the green for the 11th straight day. The index has been up 18 out of 20 days since the April lows. We have witnessed an impressive run for the DAX and on the heels of the Nikkei continuing to push higher into the stock market stratosphere. Non-stop QE and ZIRP have juiced gains, but who are we to judge other than to ride the wave higher. We'll get a few economic reports out tomorrow, but the market will certainly react to Bernanke and the release of the minutes from the last FOMC meeting. The trend is your friend.

There really isn't much to opine regarding this market. Other than the non-stop upward mobility prices have found themselves in. Sure we can dive into why stocks are trading at a premium to EBITDA, but would that make a difference? At some point we'll see a correction of some order of magnitude. However, no one knows where or when it will come. For those like Peter Schiff who were in 2006 claiming we were going to collapse completely missed the upside from 06-07 even a good rally in the spring of 2008. If you follow a sound process following price and ignore the noise you'll be able to capture any market trend in the future.

(click to enlarge)

from ZeroHedge

It is interesting to see the amount of stocks in the market that are above their moving averages. It has been a while since we have covered this metric, but given the lofty levels we are experiencing I say why not. Nearly 80% of all stocks being traded in the United States (according to Barchart) are trading above their respective 150 and 200 day moving average. 76% of stocks are trading above there 20, 50, and 100 day moving averages. These are certainly "lofty" levels, but we have seen these levels before. Any outcome is possible and having a sound repeatable process is what will set you apart from the pack in terms of solid gains.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Heading into the week the US market once again watched the Nikkei continue to move further into the stratosphere. Futures were pretty anemic heading into the trading session today. Overnight news focused on the plunge in precious metals as Silver and Gold were hit hard. Despite the negative open and sentiment both precious metals were able to find their footing and reverse to close positive. Each metal tested key points and perhaps have put in a short-term bottom. SPX briefly hit all time highs, but then were knocked off their highs of the session. Support did filter into the market helping the market to close off the lows of the session. All signs point for this market to continue higher and with Turnaround Tuesday tomorrow gains should resume.

The interesting action today centered around the precious metals and one that could turn out to be a significant turning point in the struggling precious metals. GLD tested April lows today and with a bunch of volume showed tremendous amount of support. On the other hand SLV had dropped below its pivotal point only to plow through it today. Volume certainly is saying something for both precious metals. Was today a bottom for GLD and SLV? Is anyone's guess, but we do have a clear exit in case this falls apart on us.

Wednesday we'll get a read on Existing Home Sales and the Federal Reserve meeting minutes. The focus on the language in these minutes over the "taper" of "halting" of the current money printing scheme will be nauseating. CNBC et al will have a field day with LIESman leading the charge. Price will lead the way for us. Focusing on our stocks and how they act is much more important than anything anyone can "guess" about the Federal Reserve meeting minutes. Stick with Big Wave Trading.

Enjoy this week!

Disclosure: I am long GLL.