Did you know the S&P500 has been green 5 out of the last 6 Fridays? Even more impressive, the Russell 2000 has been green 10 out of the last 11 Fridays. Those two facts coupled with a successful hold of 1,550 by SPX have me favoring the long side going into tomorrow’s anti-climatic jobs report. I say anti-climatic because it is a win win for the bulls regardless of the number. If the number is bad then analysts will say it allows the Fed more time for QE, if it is good analysts will say the economy is growing ever stronger. See? Win, win.
So while I favor a bounce into tomorrow there’s a few things I’m watching from this point on:
- GOOG gave it up — GOOG gave up all of its gains on the week, and is right back in the $790′s
- XLF looks vulnerable — XLF suffered its highest volume down day of the year yesterday, and is only bouncing slightly today
- Does VIX hold its floor? — If the VIX can maintain above the 13.50 level it will look ripe for a near term test of 15
After looking like a bottom had been carved out GOOG has retraced 100% of its move higher from earlier in the week and now looks set to head even lower. Important support lies right around $790 but below there and the targets open up. GOOG’s monthly chart looks eerily similar to a bearish pattern from January 2011 and also to AAPL’s bearish monthly signal from September. I’m not saying GOOG will have an AAPL style drop, but the chart definitely looks bearish now and rallies may start being sold. On a failure to remain above $800 GOOG’s next move is likely towards $750-$775.
The two best performing sectors today (aside from utilities)? The two that have performed worst over the last few weeks, materials and financials (as measured by XLB & XLF). My focus here is on XLF though, which had a nice bounce today but is still near the low end of its recent range. Watch the $18.10-$18.15 range closely though, a break above it and I expect the bounce that started today in SPX to have legs. If unable to reclaim that range though and I’ll remain cautious at current levels with the expectation of a 1,538-1,550 test again in the next 1-2 weeks.
The VIX pulled back today amid the rally but it only experienced a 2.25% decline, rather modest in my view. The VIX does look to have a pretty stable floor in place as it has, for the most part, successfully held onto its lows from its 3/18 gap up. This floor remains a possible headwind for the markets moving forward and that 12.57 level will need to solidly crack in order to usher in confirmed new all time highs for SPX. Above that level and I wouldn’t expect much momentum in the market, even on a retest of the 1,570 range.
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