The indexes were all over the place today with the Dow closing higher, the NASDAQ lower, and S&P500 virtually flat. A lot of the weakness in the NASDAQ though can likely be attributed to the major drop in AAPL, and to a lesser extent GOOG. The two combined to fall 7% (AAPL 4%, GOOG 3%). Being a market leader, AAPL’s drop likely has some traders worried that the market could have a delayed reaction tomorrow. However, we saw some other signs of the market shrugging off some typically bearish indicators.
For instance, we saw Spanish 10 year yields rise above 6% today, their highest levels of he year. We would have expected this to coincide with major weakness for our markets, in particular the banks. That wasn’t the case though, XLF was actually one of the strong performers in the market today, rising 0.7%. In addition, the VIX rose slightly as well and has now been higher in 10 out of the last 12 sessions, but again this didn’t drag down the S&P500.
You can interpret these a couple of different ways. The bullish view would be that our markets held up pretty well in the face of what has usually been bearish indicators. Bears are likely looking for a delayed reaction and a bright red day tomorrow as markets digest the prospect of rising yields in Spain or an elevated VIX. From a trading perspective we feel that 1,370 is really an important level.
Anyone who watched SPX for a good amount of the day today should have noticed the sea saw action that kept occurring at 1,370. Every time SPX would get above 1,370, it could next push to far. Vise versa, every time SPX fell below that level it couldn’t really extend much lower. It was almost as if 1,370 was a magnet for the index, not letting SPX sway to far above, or below the level. So when we do finally stretch away from 1,370 in one direction or the other chances are the move could gain further momentum.
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