Market Takes a Rare Day Off, Rest is Due

Yesterday was a choppy day in the indices and a rare 2013 down day. This morning, world markets are higher and U.S. stock futures are narrowly higher, and traders will be watching to see once again if weakness is contained. Fed Chairman Ben Bernanke is speaking around the open, so we will be paying attention to whether there is any shift in tone, which is unlikely.

There was a minor push-through failure in the S&P yesterday as it failed to hold above yesterday’s high of 1632. We have stated before that the market was due for a rest as it stretched from its short-term moving averages since the breakout above 1597 last Friday. Yesterday’s low of 1622 contained today’s weakness but will that remain the case going forward? Use the new short-term pivot points from today as your levels to judge market composure. Rest or digestion is key in bull markets in order to sustain a longer-term rally.

Netflix (NASDAQ:NFLX) was a standout play yesterday as it traded off the bottom of its new upper level range and finished the day up 3.74%. Google (NASDAQ:GOOG), the clear tech leader, has been a rock start but yesterday showed signs that a rest is due after it failed to hold yesterday’s high of $873.88. The banks, which have been a focus this week, took the day off yesterday.

Major short squeezes also continue to be a Q2 2013 theme, with Tesla (NASDAQ:TSLA) and Green Mountain Coffee (NASDAQ:GMCR) climbing 24.40% and 27.84%, respectively, yesterday. Short-term traders will certainly be watching those names closely for volatility today. Keep an eye on Research in Motion (NASDAQ:BBRY) to potentially be the next highly-shorted stock to ignite higher out of a lower level pattern.

Yesterday’s action was a slight shift from the melt-up we have seen for the past week and most of the year, but nothing to cause alarm. With indices extended from moving averages, perhaps you trim and trail some positions, but the macro thesis obviously remains intact.

Disclosure: Scott Redler is long SDS, CLF, FB, BAC, JPM, MGM

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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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