From the Trading Desk

Stocks Drop Again but Volume Slides as AAPL’s Slide Continues

Economic data was on the weak side today with Jobless claims, Philly Fed, and Leading Indicators all came in worse than expected. Despite the negative economic news the market was able to push into positive territory. The time spent in the green would be temporary as sellers took over pushing stocks to new lows by the early afternoon. This market has certainly weakened considerably this week and today was another sign our market is having some difficulties. The inability to hang onto positive territory is telling. AAPL continued its decline as buyers aren’t willing to step up and support the stock. Earnings will set up interesting trading next week. It is best to stand aside while the market churns and burns through others accounts. We’ll be looking for a strong reversal with volume to kick start a new uptrend.

In the after-hours session three big technology companies released earnings. MSFT and GOOG reported earnings and buyers responded pushing both stocks higher. MSFT and its new Windows 8 operating system was blamed for weak PC sales, but the weakness failed to show up in its earnings release. GOOG on the other hand pushed higher, but couldn’t capture all of the day’s losses by 8pm. On the flip side, IBM missed revenues and EPS sending the stock lower. The stock closed the after-hours session lower by 4.3% and it is important to note as the stock makes up 11% of the Dow Jones Industrial Average. Tomorrow will certainly be an interesting day with big cap tech stocks and options expiry!

The sentiment picture remains mixed with the individual investor as measured by the AAII survey showed bears fully in control, but below 50%. Bulls continue to dominate the II survey, but it too was below 50%. Sentiment is a funny thing and with Quantitative Easing has caused a bit more volatility in the readings. NAAIM survey results show many bulls have turned to the neutral camp. Nothing out of the ordinary here other than maybe the crowd was right? Time will tell, but typically a bearish reading of 50% or more signals a bottom, not a top. Perhaps in QE land opposite logic works.

We’ll stick with price action and for now we are being vigilant. Have a great weekend and remember to ride the big gain waves higher and dump your losses quickly.

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