Let’s not get ahead of ourselves as we have had quite the destruction over the past month. The current market looks eerily similar to last year’s where we experienced wild swings in the market. This market is going to fool many here. If this market is going to follow last year’s path we are going to see this market whipsaw many of its participants. The rally off the October 2011 wasn’t going to be easy to handle and neither is the aftermath.

INTC and MSFT were two big losers on the day for the NASDAQ as DELL earnings helped send both stocks lower. DELL was hit after it missed earnings and was a complete and utter disaster of an earnings release. Sellers took to the stock and were relentless and with sympathy so did INTC and MSFT. All three stocks were weighing heavily on the NASDAQ, but were unable to hold it back from closing positive.

Europe is such an annoying thing to talk about, but it dominates the news media. The best thing that can happen in terms of the US Dollar is to see the EURO collapse. Germany is single handedly holding up the entire currency and without the country the EURO would have already been torn apart. At the moment the US dollar is trading like the EURO is about to head to the toilet to be flushed away. Thus, we get lower commodity prices including lower gold and silver prices. More importantly energy and food prices are coming down as well which can only help our economy. Selfishly the EURO can’t break up soon enough!

Continue to stay disciplined despite the market environment!

The G8 summit only left one headline and that was they were supporting Greece as a member of the European Union. Any other headline not supporting Greece in the Euro would have sent global markets into a death spiral. It does appear a bit dire with many of the European countries having a difficult time containing spending and bringing in revenues. The European central bank will have to undergo a massive liquidity injection to avoid immediate danger. However, simply printing money will only lead to bigger problems if the fundamental problems are not dealt with. The situations remains quite dicey, but it is why we follow price and not our opinions.

A lot is being made of the RSI being so low recently, but the amazing part is the lack of fear the VIX index showed as the market pushed lower. We never saw real panic enter the market as we have sold off to the 200 day moving average. AAII Bears did jump considerably last week and Bulls dropped to very low levels hinting at a possible short-term bottom forming. In our forums we highlighted the need not to push on the short side as a snap back rally was very likely. Now, the market will more than likely continue to work itself higher and it would not surprise us to see the NASDAQ make its way back to its 50 day moving average. Anything is possible and we are prepared for anything.

Rally attempt is here and if this bounce has legs we’ll see a follow-through day on day 4 thru 7. Stay patient and always cut your losses no questions asked. Enjoy the week.

Sentiment continues to be negative, but the Investors Intelligence survey continues to lack the negative bearish sentiment. AAII survey certainly saw bears jump in terms of percentage and its bull ratio near lows, but the lack of bears responding to the II survey is somewhat concerning if you are bullish. The NASDAQ has corrected roughly 10% from its March highs which should be ushering in a bearish view point. However, we continue to see the neutral camp dominate the II survey. Given our current situation nothing that happens from here on out will not surprise us.

FB will be an entertaining IPO and will likely be a wild ride given the current market situation. We are oversold and a bounce would not be out of the ordinary for a quick snap rally to occur. Tomorrow’s options expiry will certainly provide the morning with fireworks. The oversold nature of this market tomorrow would be as good of a time as any for this market to push higher to work off the current oversold conditions. Cash is king here and we are looking forward to the weekend.

Get out and enjoy the weekend!

If one had to guess just by looking at a chart of the NASDAQ it is quite easy to see the 200 day moving average is a logical next step for the index. Yes, we are oversold and sentiment is getting quite negative we have yet to see any real panic set into the market. The VIX, a measure of fear has yet to signal real fear in this market. Perhaps a move above 30 would signal enough fear, but it has yet to eclipse the 30 level. Talk of another flash crash is always imminent given the even happened only two years ago. For now we have a market creeping lower and lower and even with FB coming public on Thursday there is very little that can save this market from the inevitable.

The United States has been on a war path regarding spending. Wars, social security, medicare, prescription drug coverage, etc are a big drag on the government budget. Unfortunately, Washington DC will not tell the American public the truth. Spending needs to be lowered end of story. The Buffett tax is only estimated to bring in a few billion dollars a year extra! We have a 1.5T yearly hole at the moment that Obama feels quite comfortable with. This is nuts! The only fix is to overhaul the tax code into a one page simple code and reduce spending. However, the media and Obama administration do a great job distracting the public from the facts. If anything, the United States fiscal cliff is far more dangerous than a Greece leaving the EURO.

As a reminder, this week is options expiry and Friday should be a fun day. Tomorrow will more than likely be a bit more entertaining with FB coming public. We are not planning on participating in the IPO nor trading it on the first day. We’ll sit back and wait for it to base much like EBAY and GOOG did after their debuts. We’ll be patient.

Execute you trading plan and cut those losses short.

Big Wave Trading has been under a sell signal for a bit here and now we can see why. The market remains oversold, but if the market has taught us anything it is these conditions can last for quite some time. It wouldn’t surprise us if the market produced a rally over the next day or two to resolve some oversold conditions. However, it is quite clear the trend is down and any counter trend rally should be shorted. We can blame the situation in Europe or even point to the fiscal disaster awaiting the United States. It simply doesn’t matter, price wins and we’ll follow its lead.

Just to throw a monkey wrench into the mix this week happens to be options expiry (OPEX). Always appears the market tends to get into a volatility craze prior to OPEX. Today we saw the VIX index multi-month highs confirming the selling we see on the S&P 500. This goes for the NASDAQ too, but the S&P 500 has been leading us lower and given the moves in the VIX it appears the selling isn’t done.

All signals are pointing to this market pushing lower and there is not much we can do about it. Sure a bounce may occur, but it won’t have the gusto it would need to kick off a new market rally. Too much damage has occurred and it will take a lot to repair the damage. Cut your losses and enjoy the ride.

There are plenty of reasons for this market to turn lower. A Greece exit is projected to be a very costly, but may be necessary venture. In the long run it may be the best case scenario to stop endless bailouts. In addition, the market is sniffing out the ramifications of the fiscal cliff the United States is headed towards. Higher taxes and lower spending to curb deficits will certainly lead to an economic slowdown. When you include government spending in GDP (remember, government has to take from corporations and consumer) of course when government spending is contracting so will the economy. There isn’t much other than taking our medicine we can do to avoid the inevitable.

One saving grace in the near term is the oversold conditions we have in the market currently. While conditions can remain oversold for quite some time coupled with the overwhelmingly bearish talk and lack of bulls it would not be inconceivable for a rally to occur. Shorting at obvious times tends to end in disaster for many. Have a game plan and execute it flawlessly.

Over the next 24 hours at some point Greece will decide one way or another if they will pay more than 400 billion dollar principle payment. It’ll be interesting to see if they are going to pay it or not as it will be a significant headline driving the morning buzz regarding the market. It wouldn’t surprise me if somehow the Greeks were allowed an extension or some sort of relief to avoid a potential disaster. Have a game plan and leave the guess work to CNBC’s market pundits.

Cut your losses short and enjoy this market.

An interesting development on the sentiment front is not so much the number of bulls or bears, but the number of respondents who are neutral. Investors Intelligence survey pins bulls just below 40% at 38%. Bears managed to come in basically in line with prior week’s number at 20.4%. Neutrality appears to be the new game in town. Quantitative easing certainly has held bears hostage, but now neutral is perfectly an acceptable position. Not as dramatic as the II survey the number of bulls in the AAII dropped to 25%! Quite the drop as bears jumped to 42%. Given the drop in bulls I would have expected to see bears jump to 50%, but we didn’t see this come to light. Sentiment is negative which will likely lead to some sort of bounce. Until then, sell mode is in effect.

It won’t be long till the market will turn its attention to the fiscal cliff set to derail the US at the start of 2013. What a way to bring in the New Year! More taxes! Fiscal restraints must stay in place as spending has been the main issue for the fiscal mess we have been in. Spending must be brought back in line with revenues to produce surpluses to reduce the debt outstanding the United States currently has. It will be a bumpy ride and with an election year to toss in confusion anything will be possible and it is important to stay disciplined.

Get out and enjoy the weekend ahead.

The Dow Jones Industrial average has finished lower 7 out of the last 8 days and it appears given the after-hours action it will go for 7 straight down days. However, it is not a reason to say we are going to go higher or lower. There is always the possibility for the index to continue lower. Use a solid discipline to trade this market and not one based on feel. Have a plan and execute it.

Europe continues to be on the forefront of everyone’s mind as the entire European Union hangs in the balance. As last night’s commentary stated Germany should be the ones to leave. Why should they be held accountable for bailing out the rest of the union? Nevertheless, you are going to continue to see much stress placed upon the entire union until the debt outstanding is liquidated to a point where countries are able to service the debt. In addition, spending must be brought in line with revenues as to not add to the current debt load. Will Europe be able to break away from its current nanny state and reduce its spending? Luckily, the answer is no and we have price to guide us in the market.

Unfortunately the wild card to all of this happens to be the world central banks. Given the current correction and the need to bailout Spanish banks (Portugal and Italy will be next). How will the central banks coordinate an effort to do one massive bailout nationalizing all banks in the European Union? It is highly doubtful Big Ben Bernanke and the rest of the Central Bankers would allow the market to head into free fall.

We are living in the ZIRP/QE world where anything is possible. Cut your losses short and no matter the nonsense occurring around us will simply be background noise.

We are certainly not going to get ahead of ourselves and declare this to be the bottom of the move off March highs. It is encouraging to see the amount of volume coming into the market today. However, if it is just one day wonder we’ll know sooner rather than later. To recap, today was day one due to the amount of volume and the major indexes closing near their highs of the day. We’ll be looking for the market to follow-through on a strong day with big volume over the next few days.

Who is going to leave the Euro this summer? It appears the masses believe the Greeks will leave the Euro. However, Germany is the one who should leave the ill-fated currency. Why should the Germans be forced to bailout the Eurozone? Will the people of Germany continue to vote for bailouts of countries that are irresponsible with their spending? Germany should be the country to leave the Euro just on principle alone. In the end, it all boils down to price and we’ll react accordingly.

Remember, today was a solid day for the markets. We need to see more from this market before we can confirm a new market rally. Volume is very important here and if we are to confirm a new market rally volume will need to rival today’s level. Keep in mind, cut your losses!

The one bit of economic news of the day came at 3pm when the government released figures on consumer debt. It grew and quite big. Economists expected consumer credit to grow by 9 billion, but only to see it grow by 21 billion. This comes at a time when the public should be reducing debt and growing savings. Most private businesses had to adjust to the downturn in 2008, but the government and consumers have yet to experience a similar reduction. Rather than take the medicine now we are running the risk of a much larger problem requiring much more than just medicine.

Over in Europe the people have had enough of austerity and pushed toward socialism. The only problem is no one will lend anyone in Europe any money. It will boil down to the ECB getting the nod to print more Euros. Endless deficit spending has caught up with Europe and no one is willing to deal with the consequences of it. Kicking the can down the road will only lead to greater problems and more angst amongst the people of Europe. Take your medicine and move on.

The market still remains in a very dangerous area with the S&P 500 and NASDAQ below their 50 day moving averages. It would not surprise me to see today’s low taken out over the course of the next few days. Stick to your game plan and execute.