Volume kicked into hyper drive after the release of the statement. Intraday volatility did as well and was mostly like due to algos fighting each other. The NASDAQ appeared to have a few 10 point swings in a few seconds. It is very doubtful humans could move as fast causing this type of movement intraday. It is more for our amusement to watch those trying to decipher this type of action. No way could one even begin to interpret and act upon profitably on the type of action we saw today. Avoid those who claim they can at all costs.

The fear index or known as the VIX ended the day slightly higher closing at 16.64. It dipped as low as 15.36, but was able to finish in the green. For such a big move lower the lack of movement to the upside in the VIX is somewhat puzzling. Perhaps traders aren't as fearful of a taper then the market action is leading on. For now, we have weak price action accompanied by heavy volume and this is throwing out cautionary signals.

There certainly will be pundits who will be claiming the market has exhausted itself and we have topped for good. No one knows the future and while anything is possible nothing is certain. We do see ETFs like HYG and JNK displaying very weak action and it would be easy to conclude this is over. However, in 2011 many claimed this to be over and we are sitting near all time highs. We'll let price action do our talking and follow it and leave the guesswork to others.

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

Homebuilders have certainly made a come back and judging by the volume seen in the ITB ETF buyers were rushing to pile back in. Defense of the 50 day is a big positive for the ETF and stocks. Last week it certainly appeared as if homebuilding stocks were going to head below their respective 200 day moving averages.

Crude oil settled above $98 a barrel. Higher crude prices will certainly hurt the consumer despite all the good news regarding "shale oil" and "shale gas." Higher commodity prices in general will have a great impact on lower income families and continued rising crude oil prices will certainly keep the squeeze on. DBC - Powershares Commodity tracking fund is poised to push higher from its latest consolidation. Not only will stocks have fun tomorrow with the Fed announcement look for the commodity sector join in the fun we call volatility.

There will be a lot of talk from the financial press on how to manage ahead and after the Fed policy statement. Let price be your guide rather than your opinions. Ego gets in the way often and leads to issues trading your portfolio. Let it go and follow Big Wave Trading and our process guiding you through any type of market.

Enjoy watching the fireworks!

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

Tomorrow we'll get a boat load of economic data, but all eyes will be waiting on the release of the FOMC policy statement. To taper or not will be the hot topic across the blogosphere and financial media. No one knows other than the Fed Chairman and the rest of the voting board members. If the FOMC does taper is it guaranteed the market will go lower? While it may seem logical for the market to go lower is it a given? We'll get a trend sooner or later, but no one can guarantee where the market will head next.

There are a few stocks looking decent here regardless of the increased market volatility. Learn to embrace volatility rather than fear it. Volatility is our friend and we'll use it to our advantage. Many will fear market volatility as we embrace it. Learn with Big Wave Trading how to embrace volatility.

We are certainly looking forward to the fireworks the market will provide this week. We'll be ready to take on the challenge we call the market. A strong process relying on piling onto winners and cutting losers produces fantastic results. Have a great week!

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

The other possible model change could occur if the indexes make a powerful one day price move on higher volume. If that occurs and the indexes still remain range bound it is possible, if there are leading stocks in confirmation of the move, that we could switch before the trading range is resolved.

If we were forced to make a bet on which way the market is going to break next, we would laugh in the face of someone suggesting such a preposterous notion. However, if we were asked to analyze the current situation of leading and other individual stocks in relationship to the pullback in the overall indexes, that would be a welcome logical request.

When it comes to leading stocks in the market, based on EPS and RS ratings, everything is crawling along well. Our current holdings and leading stocks have done remotely well during the pullback in the market, with many of these stocks forming constructive consolidation patterns that historically should lead to further price breakouts. Some of our favorite examples include SCTY, TSLA, TNGO, DPZ, INVN, BLMN, SWHC, LNKD, and many others. These stocks are either consolidating nicely or are trending higher, despite the weak market. This, in our analysis, is a positive sign for a possible resolution higher.

This being said, nothing is concrete and for all we know the market might break out to new highs to just reverse lower on huge volume. The point is that anything can happen in the stock market and if you are not ready for anything and everything, then at some point you will be caught off guard and pay the price.

We shall see what the upcoming week has in store for all of us traders. As it stands, we continue to be very neutral here ready for anything to happen. Once again, based on our current holdings and leading stocks, we should expect a resolution higher. In reality, however, remember, anything can happen and everything must be prepared for.

Have a wonderful rest of your weekend. Aloha from a very beautiful, warm, and sunny west side of Maui. Aloha!!

Top Current Holdings - Percent Return Since Signal Date - Date of Signal

RVLT long - 162% - 3/26/13
EAC long - 156% - 12/17/12
CAMP long - 136% - 4/26/12
POWR long - 135% - 12/11/12
CSU long - 106% - 9/4/12
FLT long - 97% - 9/6/12
HEES long - 86% - 9/4/12
ASTM short - 73% - 7/17/12
INSM long - 68% - 4/19/13
WAGE long - 63% - 1/8/13
ADUS long - 59% - 4/22/13
CHUY long - 55% - 1/10/13
SBGI long - 50% - 3/22/13
WDC long - 45% - 1/9/13
V long - 41% - 8/31/12
GMCR long - 39% - 4/23/13
BBSI long - 38% - 2/13/13
TECUA long - 36% - 2/5/13
GLL long - 27% - 2/14/13
PFBI long - 26% - 11/19/12

DDD long - 25% - 4/30/13

Disclosure: I am long [[RVLT]], [[EAC]], [[CAMP]], [[POWR]], [[CSU]], [[FLT]], [[HEES]], [[INSM]], [[WAGE]], [[ADUS]], [[CHUY]], [[SBGI]], [[WDC]], [[V]], [[GMCR]], [[BBSI]], [[TECUA]], [[GLL]], [[PFBI]], [[DDD]].

Economic data came in slightly better than expected. Jobless claims dropped more than expected. Advanced retails sales were slightly better, but weren't that exciting. Check out the following chart on jobs and ask yourself is this really sustainable?

(click to enlarge)

Is the housing recovery for real given where lumber prices have headed? What about furniture sales?

(click to enlarge)

Sentiment saw bears drop and bulls gain as the two nearly were even on the AAII survey. Bears dropped to 34.59 while the bulls jumped back over the 30% market landing on 32.97%. NAAIM saw position increase slightly to the bullish side, but still far from its highs seen earlier this year. Apparently the crowd and investment managers are not buying into the "but the [expletive] dip" or what we like to say "BTFD." We employ a different strategy that actually quantifies where we get in and out it is still fun to poke fun at the dipsters.

Time and time again trend following strategies of buying new highs or moving average crossovers outperform buying new lows. However, taking a look at the next chart it appears using volatility as a guide we may have seen at least a short-term bottom here using the SPY as our guide.

(click to enlarge)

Have we bottomed?

We can't predict the future, but we can certainly play the odds. Happy Father's Day!

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

Following up yesterday's move lower homebuilders continue to tack onto their losses. LEN continues to be one of the weakest among the group. XHB has seen its fair share of heavy selling since February and is now just finally catching up to the ETF. An even bigger decline has come from the utilities as the 10 year yield has jumped higher. XLU topped out the first of May has slide 9% from its high and has had trouble finding buyers. Higher rates have certainly stung a few industries and it is quite obvious traders aren't keen on higher rates.

Daily volatility has certainly kicked up with the VIX nearing multi-month highs. The VIX closed at 17.07 up nearly 10% on the day. However, VIX tracking ETFs continue to lag the performance of the VIX overall. For example, the VXX was only up 6.6% today well behind the VIX performance. It certainly doesn't appear investors are rushing towards volatility to hedge against a market decline. Or it simply could be the inability for these ETF managers to keep pace with the VIX. Something to keep an eye on as this market proceeds.

The positive here is certainly the major market averages remaining above their respective 50 day moving averages. A negative here was the rejection at the 20 day moving average. While the 50 day is certainly a bit more important the rejection at the 20 day is something to take notice. Since the beginning of the year we have been able to jump back up thru the 20 day with ease. Now, we have rejection. Stick with the process and do not try to be a hero.

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