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Stockhaven’s Market Take 1/7/13

Stocks gave back a small portion of last weeks gains but the selling wasn’t very alarming and looked more like an ordinary pullback after a big move higher. All the major indexes gapped down and were never able to make a push into the green. Worth nothing though is that SPY managed to make new highs during the last hour of the day and the NASDAQ was only down 2 points by the end of the day.

  • NASDAQ strength — There are more than enough tech names that are trading bullishly, while AAPL continues to be a laggard
  • XLF testing resistance — The bank ETF is currently testing its post financial crisis highs in the $17-$17.20 range

Amazon hit a fresh all time high on Monday. Facebook hit a post IPO debacle high on Monday. NFLX traded above $100 for the first time since April 2012 on Monday. CRM continued to consolidate near the top end of its recent all time high range on Monday. Are you noticing a pattern here? Major technology stocks are trading very very well, even as AAPL continues to be an overhang on the sector.

My sense is that the NASDAQ can continue to whether the storm stirring in AAPL, so long as these other major tech names do what they’ve been doing, and that’s trading higher. One of the things I am having a hard time figuring out though is at what point does the entire tech sector start getting dragged down by AAPL, below $500? QQQ still remains more than 5% off of its 2012 highs. I doubt that would be the case if AAPL wasn’t trading so poorly.

The banks are trying to pass a really hard test right here, of resistance that is. Since the financial crisis, XLF rallies have been solidly capped in the $17-$17.20 range, and that’s exactly where the ETF finds itself these days. XLF seems to be establishing some support around $16.80 as it keeps coming back towards/above $17 these last few days, but a failure to advance from this level will signal an end to the bank trade in the immediate term. Overall, XLF remains in a very strong uptrend from its November lows and should have strong intermediate support in the $16-$16.40 area. Ideally for the bulls the index doesn’t fall back below $16.50 anytime soon.

I admit I was surprised today to see the market pullback without the VIX advancing, especially since the VIX is near levels of strong support. I’m not sure what to make of this other than traders are simply scared to hold VIX premium given what played out last week. This is a risk to the bulls though as the VIX is signaling complacency here. A scenario I’m watching for is to see the VIX get back near 15 or so while SPX holds above 1,450, that would set up a nice breakout day above 1,475 in the very near future. Overall, I see nothing to change the bullish bias at this moment but continue to contend that the market will not be able to keep ignoring weakness in AAPL should it continue.

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