From the Trading Desk

NASDAQ Jumps off its 200 Day Moving Average in Increased Trade

Day three of the NASDAQ’s most recent attempted rally ended on a solid note with the index gaining 1.44% on increased trade. Big Wave Trading’s model has moved into neutral territory as we did see the market make solid gains. Traders in QQQs and SPYs didn’t overwhelming support the move as the ETFs showed volume come in lower. However, volume in the ETFs hasn’t mattered in determining a new market rally and today did not diverge. Banks lead by BAC continue to act well in this market and continue to get support from the Fed. Diverging from the market rally were Gold and Silver closing the day lower. Tomorrow’s job report is the highlight of the week and surely be a big focus for market pundits.

The NASDAQ put in an impressive move today. Suffering on the day was the VIX or fear index. Even during the decline fear never picked up to the point where you would say investors aren’t fearing any decline in the market. Volatility ETFs were once again slammed and continue to show themselves as a very difficult trading vehicle. But, now the market will have to deal with the jobs report tomorrow and election on Tuesday.

In the after-hours session plenty of stocks are moving higher. MELI and FSLR weren’t as fortunate as PCLN, LNKD, FOSL, and SBUX. Many of these stocks have been beaten up since the summer time. LNKD continues to trade higher despite sporting a PE near 200! Remember, CSCO in the 90s had an astronomically high PE and was a huge winner. PE only matters on the way down and not when the stock is moving higher. Remember, price will dictate your actions not where the PE trades. Many growth stocks are given high PE ratios by traders. It is when supply and demand deteriorates to a point where the stocks falls hard. It is only then when the PE was too high. We’ll see what tomorrow brings for these stocks, but they are performing well in the after-hours session.

We are no longer in oversold territory after today’s move. We are back to neutral in our model and will await a confirmation day. Friday represent day 4 of an attempted rally for the market. Remember, cut your losses.

CORRECTION: WE REMAIN UNDER A HARD SELL SIGNAL ON THE DJIA/SP500 BUT ARE NEUTRAL ON THE NASDAQ, RUSSELL 2000, AND NYSE. OVERALL, WE ARE NEUTRAL, WITH A TINY HEDGE REMAINING IN THE SPY/DIA. WE WILL DELETE THIS SMALL REMAINING HEDGE IF WE SUBSEQUENTLY CLOSE HIGHER ON FRIDAY.

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