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Stockhaven’s Market Take 1/17/13

The bullish move I alluded to as a possibility materialized today in a big way.

“…We are witnessing a case of low demand, but even lower supply. This means that there doesn’t need to be a huge increase in demand in order to get a big move higher. Given that its expiration week, and SPX is so close to breaking 1,475 I suspect we could see a strong move in SPY this week as it attempts to break into the $148′s.”

Today saw SPY trade above $148 on average volume relative to its 10 day average. This confirmed my suspicion that it wouldn’t take much of an increase in demand in order to break above 1,475 in the S&P500.

011713 SPX1 Stockhavens Market Take 1/17/13

S&P 500 Index (INDEX)

  • XLY is the leader today — XLY hit new all time highs today on the backs of HD, CMCSA, & DIS, which are 3 of the top 5 biggest holdings in the fund
  • Banks trade mixed — More churning for XLF as BAC & C slid while FITB rallied
  • Still waiting on tech — Although QQQ traded above its January 3rd high today, it  couldn’t close above it and actually finished below the mid point of today’s range

Consumer discretionary (as measured by XLY) was the clear bull market leader today, rallying to fresh all time highs. The ETF contains a basket of leading consumer discretionary stocks, and 3 of its top 5 holdings saw very bullish action today. HD closed just shy of 12 year highs. DIS is very close to the all time high it set last year. CMCSA closed at a brand new all time high today. The funds other 2 largest holdings, MCD & AMZN, saw gains on the day. For all the worry over the health of the U.S. consumer, XLY certainly doesn’t seem too concerned. While the bullish gap up from today may need to be tested on a pullback, it will take a reversal below $48.75 in order to disturb the uptrend at play in XLY.

For all the excitement over the banks recently, what with JPM hitting 5 year highs and GS rocketing yesterday, not to mention BAC having risen 100% in 2012, XLF continues to  trade sideways. XLF was unable to get a boost from majors BAC & C after the 2 suffered poor post earnings performances, falling 4.6% and 3%, respectively. BAC, already in the red for 2013 is now in an undeniable downtrend off of its 2013 high above $12 and will need to regain the $11.50-$11.60 range in order to reverse course. From the looks of things, could be heading for a deeper pullback back towards $10.

As for C, the stock managed to put in a low today right at its year-to-date low of $40.91. This is a clear line in the sand level to watch, below it and you will see C trade below $40 as it tests support in the $38.75-$39.25 range. C & BAC are two big banks that are likely to anchor XLF as it continues to test resistance in the $17-$17.20 range. However, not all was bad today from the banks as FITB closed at its highest level since 2008. Still though, we need to see overall strength, not selective strength, if XLF is going to make a serious run beyond $17.20. Given that banks have led this market higher, it is an early warning sign that SPX advanced beyond 1,475 without XLF breaking $17.20

Along with the banks, technology has led this market higher also. Yet today QQQ was unable to close at new year-to-date highs with the rest of the major index ETF’s. While QQQ showed signs of being able to push higher (tagging a fresh year-to-date high of $67.48), it closed off of its highs and actually finished below its mid point of today’s session.

To me this is a sign that the market is waiting to hear earning reports from heavyweights like AAPL, GOOG, FB, & AMZN before committing to a reliable move higher. Speaking of AAPL, today’s range (roughly $502-$510) gave a good trade set up between Friday-Wednesday (earnings are Wednesday after hours), below today’s low I would target a move back into the low $490′s, while above the high I would target a move into the $520′s.

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