As professionals we all know how to handle excitement, we don’t chase it. Friday the S&P 500 held its 200 day moving average around 1282-1285 and those prepared to attack that level had a nice cash flow trade long. Some who take risk are getting rewarded this morning as Friday we did see a small reversal bar (at the 200day) and some key sectors and stocks bounced well of the lows.
It was not an easy hold going into a weekend with big event risk. At this point the markets are relieved that it appears there will be no default on Tuesday. There will be a lot to deal with once some of the excitement abates. Let’s measure the move over the next few days to see if there will be commitment and follow through. Right now the range of the year is still intact as we deal with all the issues of the world, as well as sluggish US GDP growth revealed last week.
The 50day moving average which will be important to watch, which is around 1310, then a bigger level of resistance is at 1320-1323. Support is 1295-1297 and then the 200day moving average that held Friday 1282-1285.
Tech is still the group that acts best when the market tries to bounce.
Apple Inc. (AAPL) continues to lead as it went positive early Friday and tried to hold strong. The gap from earnings is holding and has been a good area to trade long against. Watch this stock for clues each day to the market. Resistance is $402-404.50.
Baidu.com Inc. (BIDU) filled the earnings gap but held the prior high area from April 28th. The stock is also holding the 10-20day moving average and will probably need some more time, but this has been acting well.
Amazon.com Inc. (AMZN) is still strong holding around its prior high of $220 and is a true leader as it needs time to consolidate.
VMWare Inc. (VMW) has been weaker since the earnings day gap up. They sold this on the day of the numbers and that was a signal to take profits and let it re-group. It’s trying to hold its 50day around $98. Give it some time.
Google Inc. (GOOG) is still well above its earnings gap of $588-590. This is acting much better. Could be a good focus as we move forward.
SINA Corporation (SINA) is lagging a bit lately but held the 50day and could bounce from here. Watch out for earnings.
Las Vegas Sands Corp. (LVS) still acts well after earnings and looks like it can move higher when the market has a positive day.
Markets still have some issues this week. European debt crises, China growth slowing, unemployment numbers coming Friday, and a possible downgrade to AA+ at some point in the next week or so. Ultimately this should create some better trading in August, which usually is a vacation type month.
Disclosure: Scott Redler has no positions