US markets finished only marginally in the red Monday, recovering from a gap down to make the day's sell-off a non-event. Perhaps the most notable aspect of the trading day was the shockingly low volume. Perhaps New York-based hedge fund managers took the day off after celebrating the New York Giants Super Bowl, but despite a late-day surge volume in the SPDR S&P 500 ETF (SPY) was the lightest since the first trading day after Christmas.
While the broad market was quiet , there were plenty of individual stock names that made big moves on the day. The highlight was undoubtedly Dendreon (DNDN), which at one point was up a shade under 20% and finished + 16.65%. The heavily shorted stock broke above a nearly month-long bull flag on good volume and hardly had a pull-in all-day.
Also continuing higher today were the shippers. I was involved with Dryships (DRYS) from Friday and the stock matched DNDN's climb, finishing up 16.63%.
Netflix (NFLX) had a wide travel range for the day. The stock opened sharply lower on news of a competing joint venture between Coinstar (CSTR) and Verizon (VZ), however news that Apple planned to offer NFLX subscriptions directly through its upcoming iTV sent shares exploding higher. NFLX finished up 2.23% and looks set to squeeze its legion of shorts once again as well.
We have seen recent IPOs get a boost amid the buzz about Facebook's IPO, and the latest one we targeted starting last wee was Pandora (P). The stock also had a bullish flag pattern developing and we targeted a trade above the $14 level. P broke that level and finished up 4.85%.
The buzz about Apple iTV also boosted AAPL stock, naturally. Apple (AAPL) broke out again to historic highs, with consumers starting to anticipate what could be the latest game-changing consumer product from the world's most valuable company. With the stock's recent strong performance, the company's valuation is starting to handily outpace second-place Exxon-Mobil (XOM).
Intra-day, the T3Live Virtual Trading Floor was also all over Fusion IO (FIO) as well. The stock broke above a recent mini lower level consolidation on strong volume and finished up 10.95%.
While it is great to see individual stocks breaking out in a quiet market, the types of stocks that are moving right now make me a little bit skeptical about this leg of the rally. We are seeing heavily shorted, beaten down stock rebound to higher levels, rather than leading stocks breakout to new highs (with the exception of AAPL). Sectors like solars, shippers and doghouse-tech are squeezing shorts, but there is little evidence of heavy true buying from institutional type players. Based on today's volume, most are sitting this market out altogether. It could be just sector rotation, or it could signal the tail end of a rally cycle.
While I harbor some skepticism about this rally, I will continue to follow the trend until it breaks. With each leg higher I trim positions and rotate into the stocks that are moving, and in certain areas will look to add to hedges. While it is annoying to bleed on hedges, it sure does help you sleep a little better at night given the high-stakes game of chicken being played in Europe between Greece and European finance ministers.
*DISCLOSURES: Scott Redler is long SPY, OIH, SLB, VMW, AAPL, WMT, LULU, FIO, AIG, JPM, LNKD, P, DNDN calls. Long VXX, Short DIA.
