Pretty quiet overnight session as Europe is red, but the pullback has been very controlled. Japan continues to hold tight and China’s Shanghai reclaims 2200. Bernanke spoke last night and he said QE will stay but the asset purchases could moderate if new data suggests the job market is getting better. Not much new here.
US markets have dribbled lower after making an all-time high of S&P 1802 on Monday and reversing back below 1998 on Monday. If you sold some strength and used high level stops you’re probably trying to figure out “what’s next.”
Today S&P futures are down 2-3 handles as we wait for the Fed minutes in the afternoon. Yesterday’s low (and the 8-day EMA) is 1784, while the prior breakout level that most will look out for support stands around 1775ish. The 21-day stands at 1765. On Monday lots of momentum did get hit hard so it would be prudent to be on your toes a little bit.
On 11/08 my focus went back to the banks as they ignited and continue to provide nice opportunities even as the market comes in a bit.
The Financial Sector ETF (XLF) didn’t get much upside momentum above Monday’s high of $21.27 but overall has been holding its recent gains from the nice break out on 11/14. The longer it stays above $21, the higher the probability we could see continuation to the upside.
JP Morgan (JPM) tacked on another 0.74% after the igniting breakout at $54.20 last week. The stock is approaching a big resistance level at $57 from the 52-week high, and it is a bit extended from the key moving averages. Some rest would be healthy. It announced a $13 billion settlement, and seems quiet pre-market.
Bank of America (BAC) continued to show relative strength as the bank held above the breakout level of $15 and tacked on another 1.88% gain yesterday. This is the best in breed in its group.
Citigroup (C) also held in well and trying to build a new base above $50.50. The longer it holds above this level, the higher the probability we could see a break out at $51.57.
State Street (STI) is on our radar as the stock is approaching a major resistance level at $36.30. It’s been getting support along the 8-day EMA. Holding above $35ish could lead to a break to new highs.
Some energy stocks are showing relative strength.
Chevron (CVX) had a nice breakout at $122 after hovering above its 200-day EMA for a few sessions. It has room for a move back to retest the prior high of $126.50.
Exxon-Mobil (XOM) had a nice gap and go last week and great follow-through on Monday. The stock put in a healthy inside day yesterday to digest this big move. As long as it holds above the gap at $94, we could see some upside follow-through above $96. It might need some time to allow the short-term moving average to catch up.
Apache (APA) has been inching higher after the nice two-day breakout last week at $91. The stock continued to hold above the 8-day EMA, showing commitment. It has some overhead resistance at $94.87 from prior pivot high. A break and close above this could add some power to its recent rally.
High beta tech is struggling a bit to hold upper levels and momentum.
Apple (AAPL) lost some momentum as the break out above $524 was not sustained. It went from my A list to my B- list. I guess we can see if it can stay above $512ish in order to re-build this upper range.
Google (GOOG) tried to break out above $1041 on Monday and couldn’t hold the momentum and failed—so that was a sell signal. Yesterday it broke Monday’s low and went back into its base. GOOG still looks okay but it also when from my A list to B list.
Netflix (NFLX) just had a two-day pull back into the 21-day EMA. Use yesterday’s low of $334.24 as it could find some buyers at this key short-term moving average after two days of rest.
Tesla (TSLA) found some buyers at the 200-day EMA to give us a nice calculated trade at Monday’s low of $119.61. The stock finished in green with 3.7% gain. It closed relatively well, but was downgraded again today and thus off a few bucks. If it can go positive, it might have room for one more trade through $129ish back to $135.
Facebook (FB) is still hanging by a thread at $45.73 but looks like buyers are trying to protect this level more than short-sellers getting aggressive. Continue to use $45.73 as the pivot level to watch. If it closes back above $47 shorts will probably abandon the cause.
Twitter (TWTR) is trying to build a floor above $40ish still needs a lot of time and has a lot to prove before you put some more long term money here. It was downgraded by Cantor today.
Amazon (AMZN) just had a nice two days of rest after seeing a new high at $373.49 on Monday. See if it could find some buyers at the 8-day EMA at $361.60.
Metals continue to be the worst asset class of 2013. It’s been in a technical downtrend for most of this year, and then some. GLD has some support it will be testing at $121.74 – if it closes below that, it could see the June lows of $114.68.
The 2x Inverse Bond ETF (TBT) is trying to stabilize and make a higher low. The recent pivot to trade against is $75.41.
There are about six weeks left of the year. The S&P is up 25% and Nasdaq almost 30%. Most of the big money has been made already. Most investors don’t care if we are up or down 2-4% from here. It’s the traders and money managers who need to preserve gains and create cash flow in a scrappy manner into year-end. I will try and keep some risk down and remain tactical.
Disclosure: Scott Redler is long BAC. Short SPY, FB