Markets exploded yesterday as the S&P took out the 20 and 50 day moving averages and managed to close “above” those levels (see chart above). The S&P closed at 1194 (on the highs) and the next level to attack is probably 1205 then 1220.
The beef I have with this market right now is speed. Stocks haven’t necessarily established set ups, it’s just been an orgy of buying. The only real layoff was Friday and I wasn’t about to get very long into a weekend.
Yesterday was different as we gapped up about 20 handles, then added another 10 handles in the first hour, we then saw a long coil or flat line which lasted almost four hours and then a massive upside explosion into the close.
Europe has a plan now to get a plan which helped, and there was news late in the day about a settlement over foreclosure issues with the banks, I believe this may have been the spark that ignited that very late day melt up.
It’s the old story, many hedge funds are failing miserably on a performance basis and they play follow the leader and chase. It’s feast or famine. The “why” of it doesn’t matter though, stocks rocked even though volume was 33% less than its three month average. For years now stocks have gone down on more volume than when they go up. This speaks to the fear greed dynamic and the former is probably more powerful. Net net, they want stocks higher now.
Alcoa $AA kicks off earnings today after the close and there will be a small smattering of earnings this week, but the big kahuna will be $GOOG which will report Thursday after the close. The stock closed at the 50 day moving average yesterday.
$AAPL looked better yesterday, but the volume was lacking.
The financials, $XLF continued their rally, and 12.62 may be the next target on the daily chart. That is also the 50 day moving average. My distaste for the banks will probably force me to short at that level, if not sooner. Take out the short squeeze and banks are utilities and their model is broken. They will go lower again.
This market is a freak show, but if you like action, you couldn’t ask for a better situation.
Have a great day.