The market is starting to make traders a little bit dizzy as it
trades back and forth in an upper level range. Stocks held up late
last week after Wednesday's outside reversal was followed by a big
gap down the next morning. Yesterday, US traders were welcomed back
to the market by a big gap up following Memorial Day, but stocks
faded for most of the session to pare gains.
(INDEXSP:.INX) futures are now down 10-12 handles this morning and
set to test our thesis that an upper level wedge pattern could be
building in the market. After a steep/resilient rally to start the
year and then a "day to take notice" outside reversal last week,
there are mixed signals that need to be worked out. The way the
market deals with mixed signals is that it trades in a range, often
one that gradually tightens over time into an apex that leads to a
more sustained leg in one direction.
Last Wednesday the market put a high in at 1687, and yesterday the
markets put a "lower high" in at 1674. Late last week the S&P
held the 21-day MA down around 1635 and today it will be
interesting to see if we can buy this down open. Perhaps we could
create a higher low to start building that more defined wedge. I
went home last night long
Bank of America
) as my only position, but I have nibbled long on some
(NYSEARCA:SPY) pre-market this morning.
This is the third time we've seen a wedge-type pattern form this
year. I think traders are happy to be able to buy down opens and
sell up opens, rather than just trying to play a relentless melt-up
like we've seen for much of the year.
Tech continues to be mixed with two-way opportunities.
), which has been best of breed, bounced off its 21-day MA but
faded at the end of the day. It needs time now. The recent pivot of
$871 is your new point of reference.
) gapped up but showed relative weakness early yesterday and some
caught a nice short. The result was a pretty ugly engulfing
candlestick. Perhaps we could now get tactical action both long and
short around yesterday's low of $212.97. Bigger support is
) has been in the penalty box since last quarter's earnings. We got
a sell signal on May 22, and since then it has been weak. Yesterday
the $170.50 floor was broken, which could have triggered a cash
flow short. Use yesterday's low of $167.06 as an action area, but
bigger support doesn't come into play now until $157-159.
) couldn't hold $448 and created a pretty ugly short-term candle.
Tim Cook did speak last night and suggested a few new tricks are up
Apple's sleeve. Use $440.85 as potential two-way action area. If it
can't hold $430 I believe many short-term traders will lose
(CSCO) continues to hold its earnings gap and it seems like money
has been hiding there. The longer it stays above $23, the stronger
the pattern becomes.
(HPQ) is also creating a high-level flag since earnings. The $24ish
level is upper support. Above $24.95 perhaps you could get another
(MSFT) has gone from the doldrums to a "go-to" type stock, believe
it or not. It's riding the 8-day moving average and still looks
Banks were stronger yesterday; see if that continues. If any groups
were to go green today, this would be one to watch.
(GS) needs to hold yesterday's gap at $159.91; if it gets below
this it could lose momentum.
Watch to see if
(JPM) can hold yesterday's gap as well at $54.02.
Bank of America filled its gap yesterday but still looks okay for
longer-term upside. Short-term it needs time.
The Transports (NYSEARCA:IYT) showed relative weakness yesterday.
Agriculture stocks (NYSEARCA:MOO) still continue to lag.
(TSLA) has been an animal for the past two months, squeezing shorts
all the way into the triple-digits. Most recently it flashed
relative strength last Thursday and gave some tactical entries at
$85.50 then $93-95, and yesterday it closed very strong. TSLA is
hard to buy now, but also hard to short. Use yesterday's high 0f
$110.75 as an action area.
The Tesla Model S Is the New Toyota Prius.
Inverse 20+ Year Treasury Bond ETF
(NYSEARCA:TBT) was super strong (thus
iShares Barclays 20+ Yr Treasury Bond ETF
(NYSEARCA:TLT) super weak) yesterday, which could be foreshadowing
a bigger move that could take place over the next six to 18 months.
Those vehicles are hard to trade, but worth keeping an eye on to
see if we do finally get that "great rotation."
Metals are frustrating for many. I do not think they are good day-
or even swing-trading vehicles due to the macro forces at work.
Gold (NYSEARCA:GLD) is holding onto this lower level or potential
double bottom by a thread. Some will say you can trade it vs.
$130.50, but it needs to get and stay above $135.50 in order to get
more attention. GLD feels heavy to me overall.
At some point we will get another leg either higher or lower, but
for now it makes sense that a range or wedge could build. So far
this recent range is 3.5%ish wide. After an incredibly strong start
to the year, this is a good spot to have flexibility and perhaps
pare risk down as markets figure out if that pullback was enough or
if we need to get 5%-plus correction for the first time in 2013.