World markets are mixed as most indices “held where they had to” in the upper ends of their ranges after somewhat of a controlled pullback for the majority of last week. Europe is flattish and Asia is green with the Nikkei leading the way up 2.29%.
The S&P 500 held the 21-day on Thursday and then blasted off on Friday. Some say “good news” was “good news,” while some say the number fell short of the true “whisper number” expectations and thus could help hold off QE tapering until March 2014. The action on Friday supported the latter theory as high beta names lagged and more defensive names showed strength, but we’ve had micro divergences all year that worked themselves out.
At this point we have another pivot to trade against that at 1779, but I would think traders want to see commitment to Friday’s action. For that to happen we should hold above S&P 1796ish this week. Some digestion above that level could lead to new highs at some point before 2013 ends.
I do think a tactical and very trade-specific approach will be the best method in the next few weeks, but there is no reason why you should abandon a longer-term plan even with this year’s gains. Use multiple time-frames in your approach.
There will be lots of attention on some Fed governor speeches today, the last day they will speak publicly before the December rate decision. The schedule is as follows: 12:30 p.m. Richmond Fed President Jeffrey Lacker, 1:05 p.m. St. Louis Fed President James Bullard, 2:15 p.m. Dallas Fed President Richard Fisher and 6:30 p.m. Dallas Fed President Fisher.
For those who trade actively, we will go over how some of the sectors responded after Friday’s action.
The Nasdaq ETF (QQQ) put in a new high at $86.18 on Friday after a shallow pull-back into its 8-day EMA. As long as the ETF stays above this key short-term moving average at around $85.28, it could see higher prices in the coming sessions. Lots of relative strength here.
The Russell 2000 ETF (IWM) broke and close above its 8-day EMA after a 0.8% gain on Friday to resume its upside momentum. Some upside follow-through above Friday’s high of $113.10 could lead to a retest of the current highs of $114.16 in this ETF. It needs to hold above $112ish to digest well.
The Financial Sector ETF (XLF) reclaimed its 8-day EMA at $21.32 after hovering around its 21-day for a few sessions. A break and close above $21.44 could set it back in motion for a potential retest of the current highs at $21.64.
The Consumer Staples ETF (XLP) has been building a decent upper channel to digest its recent gains. A break and close above the short-term downtrend at $43.15 could resolve the bull flag to the upside. I’d like to see this hold $42.80ish moving forward.
The Biotech ETF (IBB) is holding its upper level channel above $218. The ETF put in a bottoming tail on Friday signaling potential upside follow-through above $222.88.
We will also check out the opportunities in high beta tech.
Apple (AAPL) retraced another 1.39% to close on lows at $559.57. Next support stands at the 8-day EMA at $554.79 which could be the first buyable spot on this pull-back. See how it handles this level. For today, use Friday’s low as the pivot to trade against.
Baidu (BIDU) continues to hover at upper levels in front of the breakout level of $170ish. Despite its tricky intra-day action, the stock still looks poised to potentially break above this resistance level. It needs good volume and a close above $170.50ish.
Google (GOOG) closed at all-time highs on Friday. The stock been good to us this year and continues to set up every few days. There is no reason why this can’t see $1,100+ in early 2014.
Amazon (AMZN) held its 8-day after getting rejected by $400. It looks only OK to me, but it’s possible it could get going if it closes back above $390.70ish. It is tricky with wide ranges right now.
Netflix (NFLX) is getting very choppy after its outside day on 12/04. Now it’s trying to hold its 8-day. The pivot that needs to hold is $352, and below that the stock could see more pressure.
Yelp! (YELP) is hovering around its 8- and 21-day EMA to build a three-day bull flag pattern. A break above $63.72 on good volume could lead to additional upside momentum so keep an eye on this stock.
Facebook (FB) last week shaped up well as it had a nice move above $47.50ish then it opened up Friday and got rejected by the 100-day. It did come a long way from the Red Dog Reversal at $44.04 on 11/26, now I’d like to see it hold $47.50ish for commitment.
LinkedIn (LNKD) had a nice surprise for us last week as we talked about it being a potentially good trade idea around $222. It was strong after being upgraded on Friday, now some work above $228 could help it stay in play.
Tesla (TSLA) had a 2.2% pull back into its 21-day EMA on Friday. It still held half of its gains from the potent move on Tuesday. Use Fridays low of $136.30 as the new point of reference to trade around.
Banks did okay on Friday and held higher. They didn’t have as much power as they did a month or so back, but we will look at them in the Morning Call.
Citigroup (C) broke and closed above its 21-day on Friday to halt its five-day sell-off. Use Friday’s low of $51.20 as the new support level to trade against. A close back above the 8-day EMA at $51.90 could help it resume its upside momentum. Barron’s did list it as a potential spot to be long for 2014, I somewhat agree.
Bank of America (BAC) has been hovering around its 8-day EMA as it’s trying to hold upper level support. A break and close above Friday’s high of $15.72 could set it back in motion. Holding above $15.36 would keep it in play.
Goldman Sachs (GS) also put in a bottoming tail on Friday signaling that a bounce could be in order. A break and close above the two-day resistance at $167.96 could bring in some buyers for a potential break out to new highs at above $171.58. GS has been somewhat tricky and could give some clues moving forward.
JP Morgan (JPM) had a healthy pull-back into its 21-day EMA where it found some support and had a nice bounce on Friday. Look for some upside follow-through above Friday’s high of $56.76.
Wells Fargo (WFC) had a strong bounce on Friday as the bank stock gained 2%. A break above the monthly resistance at $44.74 on good volume could lead to another leg higher.
Casinos act well. Las Vegas Sands (LVS) gave us a nice breakout last week above $73ish, now it needs time to re-set up. Wynn Resorts (WYNN) also broke above $168ish and is in play. MGM Resorts (MGM) also got back on our radar as it broke and closed above $19.75ish. This could be $25ish next year, in my opinion.
Metals are trying hold this lower area above the June lows. In GLD use $117.23 as your pivot support then $114.68. If for some reason it gets back above and closes above $121ish (which I doubt) the bugs might be a bit happier.
The 2X Inverse Treasury Bond ETF (TBT) has been very sloppy but strong overall in 2013. I think rates will continue to climb in 2014. Active guys should want this to hold above $77.25ish for potential new highs in early 2014.
Disclosure: Scott Redler is flat