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