The fourth quarter kicked off with a Government Shutdown, better PMI figures, and higher stock prices. Yesterday’s price action was quite bullish even when considering the not so hot close. This market simply does not want to give up on this current uptrend and we aren’t about to get off the wave. Once again Small Caps and the NASDAQ led the market higher in strong price action. Fears seem to be disappearing with the VIX dropping despite the looming debt ceiling decision. Volume will be light when compared to yesterday consider all the end of the month volume, but today’s volume was above average. An encouraging sign as it appears institutions are putting their cash to work in the market. It is hard to argue with a bull market that has Small Caps and the NASDAQ at 52 week highs. The trend is our friend and we continue to stick with it.
Much will be made of the circus they call our nation’s capital. People tend to forget a republic is all about public debate and not one to go with the simple majority. It appears the market gets this and is completely ignoring the folks whom the American People have elected. There are rumblings of a 4th quarter performance chase rally and given the gains YTD and many who are underperforming makes some sense. We can’t predict such things, but at the moment we are seeing very bullish signals from our stocks that a big year end rally wouldn’t surprise us. We do have some distribution from the S&P 500, but from the NASDAQ and Russell 2000 perspective we simply aren’t done yet. There needs to be more evidence before we get off this wave. Ride it.
The other thing that may be at play is the fear of missing out on the headline of a deal. Many were caught off guard at the late night deal to avert the Fiscal Cliff. Perhaps, many are simply piling in now to anticipate a deal to hit the market soon. It truly is hope driving the decision process and one we do not subscribe to. Throw down your bias and join Big Wave Trading and enjoy a nice ride into the year-end.
Next week we’ll kick off earnings season and one where we have seen many warn about. The old lower and beat will be at play, but it will be how the market reacts is what is most interesting to us. More immediate will be the release of the Friday’s job number. One thing is for sure it will be the most important jobs number EVER!
This market is marching to its own tune and we are following right along with it. Ride your winners.
