Futures are bouncing a bit this morning after yesterday’s rare 2012 distribution day. When you get a “day to take notice” it is important to take note of the action over the next few sessions. Often they can lead to more weakness, but sometimes it’s just a down day in a very strong trend, which is what we have seen this year so far. What this type of day should do, is just wake you up a bit to take a closer look at what your holding and create a few “If, then” scenarios.
Gold got slammed yesterday as Big Ben didn’t allude to QE3 in his testimony to Congress. Improving economic data has taken the possibility of more monetary easing off the table for now, a negative for gold. Keep your ears open on what he says in the Senate today. If he changes his tone we could see some sort of bounce out of gold, but if he doesn't a potent down day like yesterday can lead to more panic selling.
The Beige book yesterday supported the recent data points suggesting that the economy is on the mend and heading in the right direction. Also, some yields are falling in Europe as it looks like action from policy makers has helped weather the storm, for now. While there is no QE3 imminent from the US Fed, the ECB's second round of long-term refinancing operations (LTRO) is doing its job. I do feel like this market will be a lot higher this year, but does this short term accelerated uptrend continue is the question!
After all is said and done yesterday, the S&P and Dow still held their 10day moving averages yesterday. That fact has me caught in two minds. The nature of yesterday's selling was concerning and has me thinking a small correction may be imminent, but the trend is still technically intact.
S&P support is yesterday’s low of 1363 and then the 10day at 1361. A 30/60 minute close under this could cause some pressure. The 20day moving average with some big support stands around 1351-1353. We have not tested this moving average since the December 20 gap and go.
Resistance stands at 1373-1378, and then above that 1386-1388 is the next area.
Gold (GLD) will be interesting to watch. Perhaps trying to short the $167-168 area for a trade could work. If yesterday’s move down controls this ETF in the next few weeks, it probably doesn’t close much above that area. Use retracement rules to figure out if yesterday was a bit too extreme.
Apple (AAPL) continues to VERY Impressive. It’s getting a bit to “fast” even for my taste, but it’s always good to know exactly what it’s doing. Taking profits along the way is smart and you have to feel it will have a more sustained pullback/rest, but the Valuation there is still VERY CHEAP!
*DISCLOSURES: Scott Redler is long SPY, OIH, IBM, JPM, WYNN, LVS. Short DIA, QQQ, AMZN. Long AMZN puts.
