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Stockhaven’s market take 12/10/12

Traders came back from the weekend and nudged the indexes higher, but SPX couldn’t extent passed 1,420. As we enter the second week of December markets are clearly looking for a catalyst in one direction or the other. SPX is going to have a hard time putting together much of a rally as long as SPY remains below 143. In that same vein though, the bears look lethargic up here, SPX is at the top of its recent range and they still can’t muster a solid down day back towards 1,400.

There wasn’t much to pick thru during a pretty boring day in the markets but here’s what I noticed:

  • XLF strength — Continues to hold around the key $16 level
  • VIX stays north of 16 — the VIX again avoided back-to-back down days to settle above 16
  • AAPL see-sawing   — Another gap down into the 520′s for AAPL led to another rally off of the lows, still the stock finished lower

The banks continue to prop up this market as technology consolidates. On 12/5, I wrote the following:

“So how did the market shrug off AAPL? Look no further than BAC, the bank surged 5% on its heaviest buy volume since March. The move helped pace the banking sector (XLF) higher, and resulted in a 52 week high for BAC. However, BAC was not joined by JPM, C, or GS in a move to 52 week highs, something I would have liked to see. Why? Because if this market is going to continue higher without AAPL, it will need a group effort from the banks.”
-Stockhaven’s market take 12/5/12

We’re  starting to see some of that group effort take hold as BAC, C, & JPM all had nice days Friday. While the three of them were lower today, they stayed close enough to their most recent highs to keep me leaning bullish. Still though, big banks like WFC, GS, & MS haven’t had much participation in the financial rally over the last week so there remains work to be done. Watch the first three banks I mentioned (especially BAC) as they are prepared to take a leadership role in this market if we break 1,420 with some conviction.

For the second time in three session, the VIX again managed to avoid back-to-back down days for the first time since 11/6. This signals to me that the market is still on edge about something. Maybe the market is concerned about the fiscal cliff, AAPL, Europe, who know’s… but clearly something is keeping this market on edge. There’s risk and reward on both sides of the volatility trade though, as we can see a nice rally if the VIX moves back towards 15. However, should we see the VIX move back towards 17 I expect to move back towards 1,400 (the lower end of its recent trading range).

Lastly, and what should be a familiar topic for frequent readers of my blog, is AAPL. The tech behemoth continues to struggle to hold onto gains and finished below Friday’s low. In addition, AAPL also finished below the mid point of its daily range from today ($530.05). While today’s gap down into the $520′s again found buyers willing to rally it back above $530, it was unable to stay there. This is in steep contrast to the gap down last Thursday when it finished off its low by 5%. I’m watching the afternoon low around $526.60 going into tomorrow as a break there will be very bearish in my opinion. $500 is in play below $536.

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