From the Trading Desk

European Fears Renew as Stocks Fall; VIX Jumps

Europe kicked off the selling with Spain and Italy taking on the brunt of the selling. The DAX fell 2.5% as the index fell in heavy volume erasing last week’s gains. Volume on the state side fell, but Monday’s have been light in general. Technology stocks led the decline followed by financials as NFLX bucked the trend and pushed higher. The VIX jumped above the 14 level as the fear index jumped to its highest level since the 3rd of January. Monday’s close didn’t help out the situation as sellers had the upper hand sending the market to the lows of the session. Today is just one day, but we did see a slight change in character as we have seen the market get support in the final 30 minutes. Our uptrend remains, but we are certainly on watch for our exit signals.

It is no surprise Europe is back in the spot light has they have tried to implement protections that are simply band aids rather than real solutions. Iceland is a great example of what should be done, but the Central Banks are in control and would be overrun if Europe went the way of Iceland. Spain and Italy have been pounded by sellers with the DAX finally feeling the heat. In addition, Europe is facing a EURO who has been on a tear against the Yen and US Dollar. Exporters are feeling heat and with the Eurozone needing exports to fuel their economy their currency is not helping. Price action suggests further destruction.

The first week of February has not started off well with today’s move. We were quite overbought after the big move in the market from the morning of December 31st. A rest here would be normal, but with the big declines in Europe a “rest” may be quite volatility. Stick with discipline and your plane and execute!

The debate over the “great rotation” continues amongst market pundits. With the Federal Reserve buying $85bln in bonds a month how will yields go higher? If you aren’t going to fight the Fed in the stock market why would you fight it in the Bond market? Just follow the trend and it will treat you well.

Short term Trends:

TICKER ST TREND TREND CHANGE DATE CLOSE %
SPY UPTREND NO CHANGE 2/4/2013 149.54 -1.12%
IWM UPTREND NO CHANGE 2/4/2013 89.28 -1.21%
QQQ UPTREND NO CHANGE 2/4/2013 66.48 -1.74%
USO UPTREND NO CHANGE 2/4/2013 34.78 -1.61%
UNG DOWNTREND CHANGE 2/4/2013 18.67 0.70%
GLD DOWNTREND NO CHANGE 2/4/2013 162.00 0.34%
SLV UPTREND NO CHANGE 2/4/2013 30.69 -0.29%
DBC UPTREND NO CHANGE 2/4/2013 28.48 -0.35%
FXY DOWNTREND NO CHANGE 2/4/2013 106.24 0.64%
FXE UPTREND NO CHANGE 2/4/2013 134.06 -1.06%
TLT DOWNTREND NO CHANGE 2/4/2013 115.54 1.28%

UNG change in trend. Good news for those who heat their homes with natural gas!

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