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Stockhaven’s Market Take 1/16/13

If you just looked at the daily closes on SPY the this week, you would wonder if the market has even been open. Today saw another voyage down below $147 at the open, only to see SPY close back above $147 by the the time it was all said and done. Bulls and bears are probably both frustrated here. Yesterday I said I like the strength that keeps showing up in the SPY, and that I think it is getting ready for a big move higher, but I kind of expected that to come today. While I’m not giving up on that expectation, I’ll shift my bias to neutral if Thursday doesn’t see a break of 1,475 in the S&P500. 

  • GS & JPM can’t power XLF — Although GS (up 4%) and JPM (up 1%) had good (great in GS’s case) post earnings reactions, it wasn’t enough to get XLF going
  • The sporadic tech trade continues — Recently AAPL has been weak while CRM, GOOG, FB, & AMZN have all been strong, Wednesday saw just the opposite
  • First 3 day winning streak for GLD, but… — GLD put together its first 3 day winning streak of 2013, but the price advancement wasn’t very convincing

The financial sector got a boost Wednesday after JPM beat earnings, and GS flat out blew them out of the water. Both stocks saw positive reactions, JPM put in fresh post financial crisis highs, while GS got above $140 for the first time since April 2011. Given the performance in JPM & GS, I was surprised to see XLF was flat on the day and still below key resistance at $17.20. To me this is a sign that a breakout in the banks isn’t going to be a one or two man operation, but rather a move higher is required by WFC, C, & BAC as well. As a result, we need to see similar post earnings reactions in C & BAC (or at least 1 of the 2) if we’re going to see XLF trade above $17.20.

AAPL finally caught a bid Wednesday and had its best day of the year, rising 4.15%. In a sign of strength, the stock gapped up and held onto 100% of those gap gains, something it was unable to do the first trading day of the year and two other occasions this year. However, AAPL’s strength seemed to come on the heels of weakness from other major tech names, such as CRM, GOOG, AMZN, & FB. This is not a good sign for the tech sector overall in my view.

You see, institutional money doesn’t just invest in stocks, they invest in sectors. So if you have a tech fund for example, you could expect that fund to hold a basket of technology stocks, like IBM, MSFT, GOOG, AAPL, etc. Evidence of new money coming into technology is displayed when you see all major tech names rising together.

The fact we saw strength in AAPL on the same day we saw weakness in other majors tells me that new money isn’t coming in but rather already existing money (as in money that is already invested in tech) is just shifting around. This creates more of a carousel of uptrends vs one steady dominating uptrend for the sector as a whole. This argument is supported by the fact that QQQ is the only ETF index of the majors (SPY, DIA, IWM, & MDY being the others) to have not traded above its January 3rd highs.

Gold is showing more and more signs that its recent lows may have marked a bottom. GLD experienced its first 3 day winning streak of the year and on Thursday will go for its first 4 day winning streak since November. Worth noting though is that while GLD was technically higher on Wednesday, it was only marginally so. There wasn’t a real dramatic rise in price in GLD which could signal some exhaustion here. A good sign for GLD will be if in the coming days it avoids going back below $161.50 or if it can muster a rally beyond $164.

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  • Jack

    Great insights SH! Love all the effort you put into the chat and website.

  • http://twitter.com/stockhavenchat StockHaven Chat

    You’re welcome! Thank you for reading!

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