Early morning jitters over global unrest gave way to buyers as early morning lows were quickly forgotten. Pending home sales disappointed as month-over-month pending sales sank 1% while year-over-year fell more than 4%. Perhaps bad news is good news in hopes to keep the Federal Reserve will keep rates low for a very, very long time. This stock market is still in the short term oversold and a bounce like this intraday does not come as a surprise. However, we did see volume increase on the day and given where we started and finished it is hard to put the pieces together and see today as a negative. We are not out of the woods just yet, but today was a solid start to the week.
A slight disappointment on the day would be volume on the major ETFs: SPY, QQQ, and DIA. Even though IWM finished lower volume was up showing there was some active interest in the ETF. Small cap stocks have been the forgotten child this year as other indexes still sport Year-to-Date gains while the Russell 2000 remains in negative territory for the year. It is tempting to pick up the “dog” out of the bunch, but we know through history it pays to get on leaders not laggards. If we can begin to see small caps lead the pack we will jump aboard. We are not about to guess who the leadership will be they will emerge.
This week will be capped off by the monthly non-farm payroll figures. Right now, economists expect to see the month of September add 210,000 jobs. We are going to be upfront and let you know we have no idea what the number be and how the market will react. Perhaps if we got some outrageously high number it may trigger traders to think the Federal Reserve will have to raise rates early. The most important thing for Big Wave Traders to remember is to stick with our process and ignore the noise coming from Friday’s number. CNBC , Fox Business, and Bloomberg will want you to believe they have the information for you in order to make proper trading decisions. It is all noise and useless. Stick with Big Wave Trading.
The fourth quarter has a positive expectancy and not to mention so does October. There is a great chance we can end the year adding onto the yearly gains we have already. Do not get too bullish or bearish. Simply follow price, manage position sizes, and obey exit signals. This formula will produce above average returns.
