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Stockhaven’s Market Take 1/13/13

One week after closing at its best weekly level in 5 years the S&P500 managed to close at a new best weekly level in 5 years (1,472 vs 1,466), albeit only slightly. I expect to see much more movement this week because it is expiration week and we’ll get a lot more earnings reports. XLF continues to trade sideways in the $17-$17.20. After looking poised for downside at one point last week, the bulls managed to push it back above $17 which also happened to be on the same day the indexes had their best day of the week.

  • Dow Jones Transportation index is close, very close — $DJT/$TRAN is less than 1% away from breaking its 2011 high in the 5,620′s
  • Still waiting on QQQ and Dow Jones — While SPX has broken out to 5 year highs, the Dow and NASDAQ remain below their September peaks
  • How do banks react — WFC saw shares slip following their earnings report, the next major bank to watch report is JPM

Going into last week I said I was curious to see if the DJT could keep its momentum going, and it did. Coming into this week the transportation index is even closer to those 2011 highs but it posted a doji candle at the top of a move on Friday. This candle marks a pivot point for the index. Above Friday’s high and we should see a pretty strong move higher, but below it and I’d expect some consolidation to occur.

The NASDAQ (as measured by QQQ) and Dow Jones (as measured by DIA) continue to lag the S&P500 as both indexes remain below their September highs, and as a result haven’t confirmed the recent rally. While both indexes are in bullish uptrends, bears can point to the lagging action as a “won the battle, but not yet the war” type of mantra for now. QQQ needs a strong move towards $68 to re-energize the tech bulls while DIA has triple top resistance at $135 that, if overcome, should clear the way for a stronger move towards $140.

While XLF is near its 2013 highs, it hasn’t yet managed a 2 day winning streak. A lot of that probably has to do with the market waiting to hear from the major banks in their earnings reports before figuring out the next move for the sector. My gut still says the bank trade is a little stretched out, but expecting downside after the initial blip last week proved to be ill-advised. As a result, I’m watching for more clarity before forming a bias so you could call me neutral at current levels. A move back below $16.90 and the bears could assert themselves, while $17.20 continues to be the level to take out for the bulls.

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