The Dow And Russell 2000 Close Positive As The NASDAQ 100 Limps Into The Close

May 25, 2012 4:21 AM ETNTAP, DELL-OLD, FFIV, VMW, QQQ, SPY, DIA, IWM
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Joshua "MauiTrader" Hayes is CEO, president and founder of Big Wave Trading Inc. (http://www.bigwavetrading.com/), a Maui, Hawaii-based stock market advisory service. Hayes is a well-respected stock picker and technician who combines fundamentals, psychology and money management to trade professionally in his own family, and friends accounts for more than 12 years on Maui. Hayes also runs BigWaveTrading.com, an online stock market commentary and stock selection service for short- and intermediate-term investment strategies using CANSLIM and other strategies. Hayes has been a contributor to Telechart as Sir Aloha, Realmoney.com, InvestorsParadise.com and TokyoJoe.com.

Economic news was mixed with a disappointing durable goods figure and a better than expected Kansas City Fed Manufacturing reading. The dollar rose again as the European situation continues to act as an annoyance to the market. Europeans cannot get their act together and we continue to suffer having to see it used an excuse for bad execution. Volume dropped on the day and below average showing institutions weren't dumping stock. We have seen the market gain support at the lows in back to back sessions as a sign buyers are willing to step in. Today was day 4 of an attempted rally and we'll be looking for a follow-through day soon if this rally has any legs.

The number of AAII bulls jumped back above 30% since it hit lows last week. Bears dropped below 40%, but held just at 38%. Sentiment remains bearish, but well off the extreme levels we saw last week. The Investors Intelligence survey didn't move much, but tilted towards the bears. Sentiment is by far from the holy grail of investing indicators, but it does help at extreme points. Last week we saw a market massively oversold and sentiment heavily skewed towards the bears. For now, we have lifted these conditions and move forward.

Cloud computing stocks took it on the chin after NTAP reported earnings. The stock got hammered and two other names FFIV and VMW were handed heavy losses as well. These moves along with DELL held back the NASDAQ. FFIV may have found support at its 200 day but cloud stocks have not been the leaders like they were in October of 2010. Former leaders tend to be the best shorts and if any of these stocks give us the signal we'll jump aboard.

This market still remains in a precarious position. The S&P 500 and NASDAQ have put in a lower high (end of April) and a lower low here in May. We are in a down trending market. Remember, in the fourth year of a bull market on average a 9 month bear market occurs. Given the lower high and lower low we could be in the midst of the 9 month bear market. Anything is possible and we'll stick by our disciplined trading no matter what the market has in store for us.

Have a great memorial day weekend!

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

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