SPY closed above $143 for just the 3rd time since October 22nd as the broader indexes snapped a 3 day losing streak and rallied higher. Here were the story lines for me:
- Banks continue to lead — XLF traded at its third highest level in the last 18 months
- VIX declines last hour — The VIX was lower on the day but only marginally so going into the last our, before it fell 3%
- AAPL holds $500, for now… — AAPL tested $500 putting in a low of day at $501.23 before rallying to finish off of the lows
For weeks I’ve talked about how the banks are the reason this market is pressing near recent highs and staying above 1,400. We saw more strength from the sector today with XLF matching its best closing high of the year. Best of all for the bulls is there was broad participation amongst the banks. BAC & C both traded to new 52 week highs. MS & JPM hit new 100 day highs, and GS also had a solid day. For those people looking for a sell off heading into the new year, you’re not going to get it with XLF above $16.
The VIX had an interesting day today. After holding onto a small 1% or less throughout much of the day, it had a big decline the last hour of the day closing it down 3.88%. This resulted in SPY moving straight up from $143.20′s to $143.70′s. Literally, the move was straight up, just take a look at your 3 minute chart. There wasn’t one red candle on the 3 minute chart after 3:30.
This is a strong sign of strength going into the close and should be met with follow thru right at the open tomorrow in some form. Maybe that means we gap and run, or maybe it means a slight dip at open that gets bought right. Whatever the case may be, I want to see follow thru early on tomorrow with the VIX moving back below 16 to signal somewhat of an ‘all clear’ set up going into the last week of the year.
Perhaps a good part of the rally the last half hour of the day can be attributed to AAPL, which came into power hour around $512.50 and ended it near $520. Early in the morning AAPL tested the $500 level trading as low as $501.23 but it found a lot of support. AAPL’s inability to break the $500 level today, when it had every chance in the world too after the dismal action Friday is definitely a win for the bulls in the immediate term.
However, the daily chart on AAPL still shows a stock trapped in a nasty downtrend. Moreover, AAPL volume wasn’t on par to Friday’s and it came in relatively the same price range. Why is this a problem? Because any rally towards $530 that doesn’t come on high volume, isn’t going to account for the profits people who took positions today will have. Remember, demand at one price becomes supply at another, so while we have seen enough demand in this $505ish-$515ish range to absorb the supply down here, we’ll need even greater demand (i.e. high volume > 30 million share volume days) to have confidence in a reversal, versus just another bounce that I’d recommend shorting.
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