Not a bullish day by any stretch as the indices rallied only roll over with some conviction. I mentioned in Saturdays post to watch out for a possible mini bull trap, as what might happen is a rally to the underside of the $SPX uptrend line and a failure. Well that’s exactly what happened today. Here is the Saturday post, see the first chart of $SPX to see what I talked about.
Anyway, what we need to watch tomorrow is the 50 day moving averages. I am watching the $INDU, $IWM, $SPX . The $QQQ actually broke its 50 day moving average today, so the next level may be the 200 day moving average down around the 65.60 level. I’ve been waiting for this move, as it may give some good long entry points after this big move up. I will revisit if these levels don’t hold over the next day or so, but my gut says the dip buyers will be there in force.
$QQQ The Nazzy broke the 50 day today, so next up my be the yellow line which is the 200 day moving average
This pullback is healthy and was long overdue even though the 1500 level came and went. If these moving averages don’t hold then it will be a different story, but for now, no time to freak.
Is that all you got? We pulled back Wednesday with a follow through lower on Thursday until the dip buyers showed up. On Friday, the $SPX rallied almost a percent higher. With Friday’s rally, the $SPX only lost about fifteen handles from top to bottom last week. No biggie.
That doesn’t mean we aren’t going lower before we go higher. The market may still need to work off some overbought conditions and back and fill a bit. If you can pick stocks though, you’re making money regardless, because there are great set ups and breakouts all over the place. Dare I say it, but it is a stock pickers market. Stocks like $PCYC didn’t care about the pullback and just kept going. There were so many more.
As you can see in the daily chart of $SPX below, a few things happened last week. The 10 and 20 day moving averages were broken, as well as the uptrend line. The 20 day ma was recovered on Friday though. What will sometimes happen on this kind of a sell off is the index will rally back to the “break” (in this case, back to the uptrend line, red arrow) and then fail again. This may not happen, as we could just go on to make more highs, but it bears watching. Don’t get caught in a mini bull trap.
There are cracks in the armor though, which is normal after this move up. The housing stocks $XHB got a dose of reality last week. Many of the builders were way overbought and priced for perfection.
As someone pointed out, in the case of $TOL, it is trading near 2007 levels when it had four bucks in earnings, it is now earning way less. You can decide if you think that’s a “little much”. How much the group pulls back depends on how perfectly things go from here. Nice $XHB chart below with support at the weekly uptrend line.
$AAPL has had the absolute snot knocked out of it. 30% of hedge funds sold their stakes last quarter and $AIG has replaced it as the new hedge fund favorite. The stock is also down about 30% since they started that “bullish buyback”. Don’t ever take that bait. Buybacks are ridiculous. The stock did put in a bit of a doji on Thursday and the MACD “may” be trying to turn up. Not calling a bottom, but it may have found a level for now. There is always the chance though that it has to go back and flush out those January lows, so caution fan boys.
I will have some setups posted here over the weekend is you want to check back in.
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The top callers saw more new highs today. The shorts must have stayed in Davos, because they are totally and helplessly lost. Unempowered. Greece never left the Eurozone, the fiscal cliff came and went as we kick the can, and China isn’t going to have a hard landing. Those three things were basically the short sellers stew and it never even came to a simmer. The Street thinks “the Sequester” is a new board game, as it flips the bird to the tired old troglodytes in Washington.
The serial “guessers” are out in force, they have been for about a hundred handles now. They are in a corner, embarrassed to come out of hiding. The market will eventually pullback, and in their brazen pomposity, they will think that none of us will remember their fact-less based prognostications. They will go back on the airwaves, and the hosts and co-hosts will bow at their alter. The cycle never changes. I’m rooting for them.
Just “being up too much” isn’t a reason to call a top. Just like “being down too much” isn’t a basis to call a bottom. The market is smarter than all of us, it always has been and always will be. The market will decide when its time, not a suit trying to rationalize his retarded freaking PEG ratio.
Enjoy the top. This market is amazing.
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