Today we might finally have the formula for a break about S&P 1700. Europe continues to gain traction with better numbers and the BOE statements this morning. China’s PMI is back above 50 after hitting an eleven month low of 47.7 in July. Japan also held the trend where it had to, and is bouncing back 2.47% after a sneaky 5-6% move lower from its upper range.
This is now 15th session that the S&P has been above 1670 absorbing a 5% move in July and letting the 8- and 21-day moving averages play catch-up. There’s been a bit of uncertainty which way this channel will break, but today could give some clarity with a strong close above 1698. The action pivot for adjustments of tier size and stance should take place around SPY $169.85 if you haven’t already.
We talk about an approach to the market or a “system,” and the importance of knowing your time frame. A macro plan has rewarded investors who have stayed the course over longer time-frames. An intermediate approach where you navigate trends over months looking for strongest sectors and stocks could also generate alpha. The active trader who is typically flat each night has had the opportunity to make cash flow due to tradable volatility. Everyone has a different style, and I think for some you can do all three in some capacity.
We’ve talked about the S&P Road to 1700 for the past few years to try to keep people constructive on the market. There have been way too many fear mongers saying the markets don’t work, or that equities are dead, scaring the average investor out. That’s maybe why when we hit S&P 1700 I don’t think there will be streamers and balloons falling from the NYSE.
In today’s Morning Call we will take a look at the banks that showed some relative strength after being quiet for a bit.
C had a nice run since the June 24th lows, then built a nice base above the 21-day MA. Yesterday it saw a nice move up until FOMC minutes when it got rejected at $53 level. Next action area is when it can close above that.
BAC got a lift to go as high as $14.85 yesterday but also had a fast pull back after the Fed announcement. The bank still registered 0.55% of gains. The $14.45 level remains to be the key short-term support to watch. I don’t think the highs of the year are in.
JPM broke out of the short-term descending channel on good volume yesterday, but couldn’t find momentum above $56.27 as the stock saw a sharp sell-off together with the market in the afternoon. It needs to hold the 21-day of $55.28 to keep its short-term bullish composure intact.
GS bounced off the upper level support at $162.30ish and saw decent gain of 1% despite the pull back in the afternoon. It has some intra-day support at $163.70. Above $165ish and it could get more momentum.
MS filled a portion of its earnings gap to the downside before it saw a small bounce off $27 support level yesterday. The longer it holds above this upper support level, the higher probability we could see some continuation to the upside. Needs to get and stay above 27.52 to be in better shape.
We will also take a look at Social Media.
FB saw a small red dog reversal at $37.96 after having a nice run after its earnings. It put in a low at $36.33 yesterday, which could be the new pivot point to watch. Below that $35.32 is the next important support as this is the 25% Fib retracement level of the move from pre-earnings to recent pivot highs at $38.31. Not sure how long it will sit around but $40+ could be in the cards at some point in 2013.
LNKD has been climbing its 8-day up for the past month. The stock has a strong chart and saw constructive action heading into its earnings. LNKD is expected to report earnings of $0.31 per share after the close today.
YELP reported after the close yesterday, the stock jumped 6.4% to $44.46 on moderate volume after hours. Yelp reported a second-quarter loss of 1 cent a share on revenue of $55 million. See how it handles the opening gap today.
Some quick hit follow ups
AAPL met some sellers right off the open as it approached some resistance at $457, then the stock bounced off the first support level of $449.40 to get a classic bounce. The longer it holds above $450, the higher probability we could see some upside follow-through above $457 in the coming sessions. Overall, the stock has been acting well after its earnings report.
AMZN has been lethargic since the day after earnings. Keep on the watch list as long as it holds $296 area. It could use some time.
GOOG is trying to put in a pivot to trade against – right now that’s $880ish. Needs to get and stay above $897 to get some momentum back.
NDLS gave us a nice move from $43.90 to $46.72 yesterday before it saw some profit taking and pulled all the way back to lows. It needs to hold $42.80 to avoid some sellers.
TSLA continues to move well and reward traders and investors mostly from the long side. It seems like only a matter of time for it to see $140+, in my opinion, like we’ve been saying for multiple months.
TBT saw a nice gap up but failed to build on to the pre-market strength and filled the gap to the downside. The ETF closed the day down 0.69%. It needs to hold $74.50-75.00 to keep its uptrend intact.
Metals held where they had to and still look decent after the “blood on the street” lows. GLD needs to stay above $126.13 to stay constructive. For it to get more upside it needs a strong close through $129-$129.55.
Disclosure: Scott Redler is long BAC, C, SPY, LNKD calls.
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