S&P Finally Breaks Out of Tight Range to Five-Year Highs

The market started to turn higher pre-market following better-than-expected jobless claims and housing starts data, and picked up steam during the session to finish with healthy gains. All major indices finished up around 0.6%. The S&P broke higher out of the slightly ascending channel that has been building since the market opened sharply higher on New Year’s Day.

Yesterday the banks, which have been leading the market for the past few months, continued higher thanks to a blockbuster earnings report from Goldman Sachs (NYSE:GS) and a decent one from JP Morgan (NYSE:JPM). Goldman opened at new highs and continued during the session while JPM rallied from negative to positive. Still, the strength from the banks wasn’t enough to push the indices out of the range. Today, the banks were weak thanks to only a narrow beat from Bank of America (NYSE:BAC) and a miss from Citigroup (NYSE:C), but the market rallied out of the range. Go figure.

In addition, Apple (NASDAQ:AAPL) staged its most impressive move in weeks yesterday, finishing up more than 4%, and not even that could push the market higher. AAPL finished today down 0.7%, which follows the recent theme of AAPL being unable to sustain a multi-day bounce. Most recent AAPL bounces have lacked power and fizzled out quickly. As a trader right now, your focus should be elsewhere, in my opinion.

Gold (NYSE:GLD) opened lower this morning due to the perception that strong data decreases the half-life of central bank easing, but the precious metal rallied at 10am for the same reason when the Philadelphia Fed reading was lackluster. GLD looks to breaking out of a multi-month descending channel as rhetoric about potential currency wars grows louder.

We have been talking about the significance of September highs at 1474, and today we closed back above them at five-year highs. The important thing now is to see whether we can hold up at these levels and continue to digest, or whether we get some type of pullback. The slow intraday acton may be a little bit frustrating for short-term traders, but it is exactly the type of action swing trading bulls like to see.

By Scott Redler and John Darsie

Disclosure: Scott Redler is long MSFT, GLD, TBT, GE calls, CAT, DBC, TASR, XHB, DELL, LNKD, F. Short QQQ, SPY.

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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