After yesterday's sell-off -- the biggest decline for the market in five months -- we asked: Will this time be different? The indices have been incredibly resilient so far in 2013, but the warnings signs of a potential correction have started to add up. Several bellwether sectors have shown consistent relative weakness in recent weeks, and then Friday commodities started a harsh correction. Yesterday's sell-off felt like the beginning of a bigger down move, but today we got our customary 2013 snap-back. Will the market once again shrug off a sharp decline and take aim at highs?
The S&P (INDEXSP:.INX) finished the day up 1.43%, erasing the majority of yesterday's losses. At this stage, though, it's hard to have conviction in either direction and many traders are feeling flatfooted. I think while it's hard right now to feel like you have much of an edge trading the indices you should perhaps focus on stocks that are less correlated. If you are a short-term trader, you could potentially look for new opportunities to develop after earnings reports this season.
While stocks rebounded impressively, commodities could not muster much of a bounce. After getting liquidated the last two days -- suffering its largest one-day loss in 30 years yesterday -- gold (NYSEARCA:GLD) opened higher this morning but was unable to hold the majority of that gap. GLD looks like it could be headed lower, but at this stage it might be a little bit hard to chase to the downside.
The banks have been an interesting case this earnings season as it appears the Street had very high expectations for their reports. JPMorgan ( JPM ), Wells Fargo ( WFC ), and Goldman Sachs ( GS ) all delivered strong reports in the past few days, but traded lower. Citigroup ( C ) was unable to hold its pre-market gains yesterday due to broader market weakness, but was able to bounce 3.99% today. Traders will be watching closely to see what this type of action leads to in the financial sector.
Yahoo ( YHOO ) has been a leading stock this year after I listed it in my 2013 predictions article. The stock had already hit my targets into tonight's earnings report so I did not own any common stock, but I did take a small call position into the announcement. YHOO, though, looks like it may be due for a pullback as it is trading down 3.57% after hours following the report. Traders will be watching to see how it treats the gap tomorrow.