Market Looks to Build on QE Taper Inspired Breakout

There are lots of green arrows around the world as they follow the US’ lead from yesterday. The market liked the way the first taper was handled yesterday as they staged a massive Red Dog Reversal or “outside day” giving most market participants several spots to make adjustments as yesterday’s rally built in the last two hours of the session.

Now a little digestion in front of 2013 highs would be nice before heading higher. Futures are down 1-2 handles as a little work over 1800 would be constructive. In order to see commitment to yesterday’s move you would think we should hold above 1795ish. If we do for a session or so, 1813 shouldn’t be a problem, and then we could continue higher.

Each day we try to go over active strategies to create alpha and cash flow. Yesterday we tried to focus on the banks that had a strong session and are back in the spotlight.

The 3x Bullish Financial Sector ETF (FAS) jumped 6.3% to put in a new high at $86.35. After a potent move, it could see some upside follow-through above yesterday’s high.

Bank of America (BAC) also had an igniting move to log a 3.36% gain after seeing a Red Dog Reversal at $15.14. Holding above $15.40ish would keep its momentum intact for a potential retest of the 52-week high at $15.98.

Goldman Sachs (GS) broke above the $172.20 pivot to get some upside momentum. The bank registered a 2.55% gain to put in a new high at $174.92. Staying above $172.60 would keep the bulls interested. This was a nice focus yesterday as it provided leadership.

Citigroup (C) also had a nice reversal to clear some short-term resistance yesterday. It has reclaimed the support of 8- and 21-day EMA. Holding above these key moving averages at $51.31 could attract more buyers. The next pivot to watch is $52.61.

Wells Fargo (WFC) is not the easiest to trade but back at highs as this has been the class of the sector for investors.

Check the Homebuilders (XHB) ahead of the existing home sales data at 10:00 AM ET and some Biotechs (IBB) that acted well yesterday

Lennar (LEN) had a nice push into the monthly resistance level at $37.80 yesterday as the stock was among the winners with a 6.34% gain. A break and close above $37.80 could add some power to its rally.

Toll Brothers (TOL) also enjoyed a 3.62% gain to approach the upper end of its monthly range. $35.25 is the next pivot to watch. A break above this level with some authority could lead to the next leg higher.

Alexion (ALXN) had a potent move back to highs to register a 4.54% gain yesterday. After producing a big green bar on the chart, the stock could see some upside follow-through. A break above $129.22 would mark a new high.

Celgene (CELG) put in a big bottoming tail, something to take notice of. The stock has reclaimed the support of its 21-day EMA and this could be the start of a potential bounce back to highs. Keep this biotech name on your radar.

High beta tech continues to be mixed.

Apple (AAPL) didn’t get the China Mobil news that was expected and thus was pressured yesterday. It did hold Support #2 outlined at $538ish. See if it tries to work off some of the negativity. Now it has some support at $545ish, maybe it tries to fill the gap above $551.50ish.

Netflix (NFLX) is very choppy but continues to hold its 8-day EMA and has a pivot that could be buyable at $378ish.

Amazon (AMZN) responded well yesterday and looks like it could want to see $400 again.

Google (GOOG) had a big reversal yesterday and that stock continues to hold its trend that has been in place since the earnings gap. I still think we could see $1100 in early 2014.

Tesla (TSLA) gave us a lot of opportunities in the last week or so starting on 12/09 around $146 before hitting $154.90 yesterday. See if it can hold above $145ish for another set-up.

Facebook (FB) has been super strong since regaining its footing with a Red Dog Reversal on 11/26 at $44.04. There is news of a big secondary that has it down today. It’s extended and the 8-day is at $52.67ish.

LinkedIn (LNKD) has been very weak but held the 200-day EMA yesterday at $207ish. See if that level holds. If it trades above $218ish maybe you could get a cash flow trade to fill some of its gap.

Some retail names broke out that we spoke about like Under Armour (UA) and Michael Kors (KORS)

Casinos continue to act very well. Las Vegas Sands (LVS), Wynn (WYNN) and MGM Resorts (MGM).

Metals continue lower like most of 2013.

Gold (GLD) had some nice downside follow thru to yesterday’s weakness. The next real level is the June lows of $114.68.

The 2x Inverse Bond ETF (TBT) was very erratic yesterday but looks like it’s only a matter of time before it see’s $80+, in my opinion.

This market can reward you on multiple timeframes if you educate yourself and learn a process. It’s not too late to get started. My 2014 thesis will be out shortly.

Disclosure: Scott Redler is long GS, BAC, GE, IBB, FXI.

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