Despite the conventional wisdom amongst traders that a correction to the most recent rally is a foregone conclusion, this market has consistently been a tough nut to crack for the bears. In particular, today’s session had all the makings of a huge “sell the news” reaction to $AAPL‘s earnings yesterday, yet the broad indices rallied back from the red to finish nearly even, as the $SPX closed down 0.10% at 1205. Indeed, we may be in a topping process, but the longer we consolidate above 1200, the more likely it is that the bulls will regroup and take us to new highs. Keep in mind, as the chart below illustrates, that we have already had a successful test of the 20 day moving average.
Psychologically, finishing comfortably above the 1200 level was a big plus for this market today. I would use that round number as a good “tell” as to which direction we go from here. If we drop below there tomorrow, then I am looking for another test of the 20 day moving average. If, on the other hand, we can move above 1210, then I believe the bulls will have seized control yet again for another move higher. Note also that a big down day tomorrow will cause the market to break down below the pink trend line in my chart of the rally since February. So, we really are at a critical point in terms of the short and intermediate term direction of the market.
As for my individual trades, I had some nice gains in $EPAY, $DPZ, as well as two new additions to my portfolio: $AES and $COCO. As stated in my trading video last night, I took a decent sized chunk of profits out of the 7% move in $EPAY. I still have a large cash position and will likely continue to do so until we get through the heart of earnings season. If we do break down tomorrow, I will buy the ultra short materials ETF, $SMN, due to the absolute and relative weakness in that sector over the past week or two.
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what do you think of atw? moving into an ascending triangle with resistance at 38?
The bull volume makes me think it’s being accumulated by the big boys. The $38-$40 level is pain the ass resistance, though. I would watch it closely, but wait until it tries to clear $40 before committing fresh capital. It could continue to drift some more, so I’d wait until it starts to get some mojo first.
Chess – What’s the basis for the CW statement?
“Despite the conventional wisdom amongst traders that a correction to the most recent rally is a foregone conclusion”
The way I see it there are a sum total of 2 bears around here now – Cain and myself. Even T MOE threw in the towel a while back.
Thanks. BTW Nice job on KoPG.
Check that — Add Phil and Huggie. I count 4 with actual shorts. Anything else is just opinion (and “PermaBears” don’t count).
Well, I still see more cautious bulls than outright raging ones. Sure, people are long, but a lot of them have one eye on the exits and call the top every time we have an up day.
Fair enough. Agreed.
Thanks for reading.