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Stockhaven’s Market Take 3/5/13

Today was a record setting day in the markets as the Dow Jones Industrials average traded to a new all time high. In addition, the Russell 2000, Midcap 1000, and Dow Transports also were some of the other major indexes that hit new all time highs. I suspect you’ll have a lot of gloom and doomers saying there is no reason for new highs and fear mongering but I wouldn’t read too much into that. The bottom line is is the market remains strong and there simply aren’t that many technical red flags being raised.

  • What to expect next — The market will likely ride this momentum higher until it doesn’t anymore as trivial as that sounds
  • QQQ strongest since November — QQQ just had its best 3 day winning streak as measured by performance since November of last year
  • Banks provide confirmation — Being that they have led this market higher, it was critical for the bulls that XLF moved to new year-to-date highs

The natural assumption after today is that the market is due for a breather, which is exactly why I don’t think you’ll see much breathing. More people than not are likely expecting a pullback here and often the expecting outcome by the majority isn’t the one that plays out. If there is a pullback though 14,163 is a good level to watch in the Dow as that was the previous all time closing high. In the S&P500 1,520-1,530 needs to hold as support but I will not be surprised if we don’t see south of 1,533-1,535 at all this week. Based on my analysis of open interest, the 1,550 level should act as a magnet ahead of next weeks expiration.

I was pleased to see QQQ show some more consistency today as it put together only its 3rd 3 day winning streak of the year and only its 5th since September. Today’s gap may need backfilling down to $67.68 but all in all there is absolutely no reason for QQQ to go back below the $67.50 level. Tech has been stuck in a relative price channel all year and the days it breaks out to the upside of that channel are the days you see overall days like today in the market.

While GOOG might need a rest after posting its second straight all time high and first 5 day winning streak since September it remains the technology bull leader. I expect strong support for GOOG to emerge in the $820-$825 range where a move below that serve as as a warning sign for this market overall to me. AMZN at $275 and CRM at $185 are two stocks that I believe could be ready to follow GOOG past key round numbers at $300 and $200 much like GOOG just did with $800.

Even more important than technology perhaps is the banks which had a good (but not great) day today as XLF closed at a fresh year-to-date high. I put not great in () though because XLF did close closer to its low of the day than high and financial leader GS actually closed near its lows for the day (albeit still in the green). Watch the $17.75-$17.80 range for support in XLF as holding it is really key in solidifying the move higher that has played out over the last few days.

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