US stock futures have surged to positive territory Thursday amid reports of a Greek debt deal. Small snags had been holding up the final approval of a deal between the Greek government and European finance ministers, and it appears those have finally been worked out. Also, the Bank of England, as expected, expanded its asset purchase program in an attempt to stoke the flagging British economy. Also, Chinese inflation data came in a little hot last night.
The market has been resilient this year, seemingly in anticipation of a Greek debt deal getting done. Yesterday the market had a morning pull in but it was met with dip buyers once again. Some strong stocks continue to power ahead as others consolidate and wait their turn. Visa (V) and Cisco Systems (CSCO) delivered beats on their earnings, and Groupon (GRPN) fell flat.
Diamond Foods (DMND) is the disaster of the morning. The company had been accused of accounting irregularities and confirmed restatements last night in management shake-up. DMND has a monster short interest, more than 40%, and those shorts have now been vindicated with the news and stock price collapse. DMND is down more than 40% this morning. The stock is likely to be in play this morning as shorts may look to cover.
In this type of market, try to stay with the trend as long as possible. In the last two days, I have made attempts to press shorts instead of adding to longs, which turned out to be the wrong approach. I thought that after such relentless strength in 2012, it might be time for at least a mild pull-in. However, I underestimated the underlying bid in this market. Stay flexible, but with the trend for now. When the trend changes, so will we. Anticipating is a tough game to play.
Keep an eye on the 20+ Year Treasury Bond (TLT). Below $115.50 and you can see a sharp decline.
Support on the S&P is 1340-1341 from yesterday. The next area is 1333-1336, which is the recent upper floor to use as a bigger area. The 10day moving average is at 1329.
Resistance sits at yesterday’s high of 1351, above that then you have 1356 with the 2011 high at 1370.
There are still multiple set ups in this market that we isolate in the Morning call and in our “Off the Charts” newsletter.
Disclosures: Scott Redler is long SPY, OIH, SLB, JPM, AIG, WMT, LULU, QCOM, VMW, DRYS, DNDN, DNDN calls, VXX. Short DIA.
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