Despite a midday rally stocks simply could not hold onto gains as end of the month volume ramps at the close. We continue to see some positive action in select stocks, but the indexes simply cannot find their footing. GPRO continues to extend its gains and we continue to see positive action out of a few other recent IPOs. The action at the end of the day today was not ideal, but it was not all that bad. Overall, today was not all that bad as it could have been worse. Now, with a positive expectancy for the fourth quarter our attention will be focused on leadership.
One potential issue we see is with the Russell 2000. Today the index took out its August low and experience non-stop selling as the Dow, S&P 500, and NASDAQ Composite were able to hold relatively well. We could try to extrapolate many different means like Small Caps are simply foreshadowing the ultimate top for this market. This very well may be the case, as there are times in history Small Caps do hint a larger decline. However, it does not happen every time there is a market decline. Your focus should be on what is leading the overall market and not lagging.
The US Dollar index continues to shine as we continue to see global unrest move throughout the world. Regardless of where the unrest is the dollar continues to be the currency folks run to when tensions on the rise. Demonstrations in Hong Kong certainly do not help things, but will it create a crisis? Where we certainly could see one is in Russia as the Ruble continues to tumble. Brazil appears to be in a bit of trouble and you always have the potential for things to unravel in Europe. While these may be great reasons for a market decline we have seen this market brush off these types of events. Stick with Big Wave Trading as we cut through the noise using our time-tested process.
Tomorrow starts the fourth and final quarter of 2014. Domestically, this market will have to adjust to life without free liquidity. How it will turn out is anyone’s best guess. For now, we are experience a market digesting its gains and looking for a direction to move in. Whatever direction the market decides to move we will follow. Remember to cut those losses short.
