Today is a pivotal day that could start determine the trend in the market. The only wildcard is quad witching OpEx on Friday, which could lead to some choppiness. The market was down on Monday, tech led the bounce yesterday and helped the market rally, and today is the 5th day of trading with the S&P trading above a newly established floor of 1306-1309. This is typically the time where we see some type of resolution, but we may have to wait for some resolution in Europe with the Greek elections looming and an upcoming European summit. The key question is whether this new floor can hold or will traders continue to trade against it and have the price resolve to the upside?
The futures are slightly lower, but everyday has been different—oscillating around +/- 1%—without much follow-through. If traders take out the high today, we may be able push above the 1324 mark. The longer we stay above 1310, the more likely we complete the inverted head and shoulders and rise above $1324 and test $1345-$1360.
JP Morgan (JPM) is trading alongside the market with a different variation of the inverted head and shoulders pattern. We have to wait for Jamie Dimon’s testimony in front of congress, but if signs are positive, which I expect they will be, the stock should break the $34.50 mark and gain some relative strength.
Apple (APPL) had some downside follow through as it reversed and helped the whole market reverse yesterday. Bears are trading it short vs. $580 and bulls will stay long if it continues to trade above $568. If it gets above $576, yesterday’s high, it may get some momentum, challenge the big resistance around $580, and continue to rise.
At this point, I am taking both short and long tactical traders that keep me safe from the turbulent and somewhat unpredictable market, but I do not think this is a time for big bets in either direction. There is definitely a difference between quality stocks that are investment quality and stocks that bounced back to be sold. Stocks that held their 100day moving average when the markets came to or below its 200day is an indication that this a quality stock worthy of a buy.
Disclosure: Scott Redler has no positions