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Stockhaven’s market take 1/3/13

Markets took a breather today after a 3%+ rally to start the week. Today’s action was pretty tough to trade because there wasn’t much of a range to play around with, at least on the stocks/etf’s that I follow. From a bullish perspective I would have liked to see the VIX creep up a little bit as that would open the door for a faster move higher, as opposed to a slow grind up, which is what I am expecting.

As I said, today was pretty dull, but here’s what stood out to me:

  • Gold continues to trade weakly — GLD took one day to give up the gains it took 2 days to make and the technical back drop doesn’t look to bright
  • SPY holds onto gains — SPY traded in a $1.42 range yesterday, today it closed above the mid point of yesterday’s range which is a good sign for the bulls
  • AAPL can’t muster 3 day winning streak — Had AAPL closed green today, it would have been the tech giants first 3 day winning streak since 11/26

In what continues to be one of the most uneventful trades of the last few months, gold is once again revisiting 4 month lows. There are a lot of gold bugs out there who base their bullish outlook on the view that the dollar will continue to fall long term as Mr. Bernanke continues to print more money. The problem with this thesis is it simply isn’t working right now. GLD has been in a downtrend since October and today’s action looked very bearish. A break below $160 in GLD and I’d be surprised if we didn’t see $150-$155 within the 30-90 days that followed. A sustained move back above $165 is required to break the October downtrend.

There was an interesting article on CNBC yesterday that caught my eye, it had a headline kind of like this:

“Why Big Investors Are Selling Today’s Rally”

I thought to myself, well that’s odd. If so many people are selling today’s rally, why are we having it? The bears were unable to shake many bulls today as the most damage they could do was bring SPX down 5-6 points at its low. After a 60 point rally off of 1,400 they’ll need to do better than that if they hope to avoid a test of 1,475. Moreover, SPY managed to stay (for the most part) above the 50% mark of yesterday’s range. I put a lot of emphasis on 50% (or midpoints) levels because psychologically they represent a majority (i.e. above the midpoint then the majority of traders who went long are in the green). Today’s low ($145.34) should be watched closely, above it and 1,475 is in play any day now, below and we may need to establish some support between 1,440-1,450 in SPX.

Today’s potentially bearish omen comes courtesy of AAPL. The stock gapped down today and put in both a lower low and lower high vs yesterday. Granted, AAPL is still holding onto $10 worth of its gap from the other day, but its inability to move above $550 is noteworthy. While I do believe a test of 1,475 is in the cards, how much higher beyond that has a lot to do with AAPL if you ask me. I think its foolish to expect the market to rally substantially without its bull market leader rallying too. As long as AAPL remains below $550 it looks like the path of least resistance from here is lower, but holding support in the $530-$535 keeps the recent bottoming base in tact.

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