Will This be a Classic Turnaround Tuesday?

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The month of May started off with a bang. Last week's laggard, the Nasdaq 100 , outperformed the S&P 500 and Russell 2000 .

As we woke Monday, we were faced with news of a bond default by Puerto Rico and a major merger in the oil services industry between Baker Hughes Incorporated ( BHI ) and Halliburton Company ( HA L) falling apart due to opposition from both U.S. and European antitrust regulators. Yet investors seemed almost giddy and pushed stocks higher. The question is, why?

First-of-the-month asset allocations on the part of mutual funds may be partially to thank. Another reason could be Warren Buffett's comments at the annual Berkshire Hathaway Inc. ( BRK.A , BRK.B ) shareholder meeting over the weekend. The Oracle of Omaha spoke positively on, Inc. ( AMZN ) and other large-cap tech stocks, and that was reflected in the Nasdaq 100's 0.9% gain.

On my daily call with hedge funds, Monday's topic of discussion was whether this underlying bid in stocks was setting us up for a classic "turnaround Tuesday." For those not familiar with this phenomenon, Tuesdays have a tendency to move in the opposite direction of Mondays. I might add that a pop and drop or drop and pop in the first few trading days of a new month or quarter is not at all unusual. We shall see what this Tuesday brings.

I'd like to once again cover the banking stocks, since they are one of the best ways to gauge strength or weakness in the overall market. After an exhaustive rally off the February lows, the KBW Nasdaq Bank Index (BKX) finally kissed its diagonal resistance line from last year's highs.

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I heard more than a few analysts discussing the strength in bank stocks on Monday and how it will continue. I'd just like to point out that last week's continuation rally now has the index at overbought levels last seen in 2012, so a sustainable breakout stands very little chance.

As far as the broader market goes, Monday's rally took the SPDR S&P 500 ETF Trust ( SPY ) back above its 21-day moving average (yellow line) after closing below it on Friday for the first time since February. However, the 8-day moving average (blue line) is now pointing lower for the first time since February and likely to act as a headwind in the near term.

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Other than that, not much changed on Monday as we kicked off the typically weak month of May. I'll stick with my theme of selling/shorting stocks into bounces and refrain from chasing the market higher at this juncture.

Today's Trading Landscape

To see a list of the companies reporting earnings today, click here .

For a list of this week's economic reports due out, click here .

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As of this writing, Serge did not hold a position in any of the aforementioned securities.

The post Will This be a Classic Turnaround Tuesday? appeared first on InvestorPlace .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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