S&P Closes Well Above The Gap
Today was a quiet day for stocks until CSCO raised its guidance which caused the market to rally in the afternoon.
Notice how the S&P closed well above its gap. Looks like the S&P will make new year highs in the days to come. I think if the S&P does make a new year high, it will be a false breakout and I might possibly be looking to short, but it is important to wait for the market to at least test the year high before shorting.
If you've been reading my blog over the past 2 weeks, you would know that I've been expecting the S&P to make new year highs not because it is strong, but because it is being pulled up by the rest of the world markets such as EEM, DAX, EWM, FTSE, Shanghai...etc.. I see lots of weakness internally when I look at the various sectors within our stock market and that is what is preventing me from getting long SPY, DIA or QQQQ.
We'll see what things look like if and when our stock market breaks high. Who knows, maybe the weak sectors will become strong such as the banks. We have a few banks reporting on Monday such as Citigroup (C). If I see them suddenly showing strength along with home builders brokers,reits..etc, then I won't be looking to short anything. I'm taking one day at a time and I'm going to let the market tell me what to do, but so far I think this rally has no legs.
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4 comments:
Thanks for your posts Kevin some great ideas and oversights .
1. If we come up and test do you see Gold and Silver testing their highs ?
2. Once we do test where do you see support for the S&P and would you go back in long at that juncture , what is the maximum period of time you would guess it would take to find a new bottom ?
3. What would you buy POT at if we were to pullback ?
Thanks again .
I also think this market rally has no legs and fully expect a correction once earnings season has passed or is nearly completed, as there will be a lack of positive drivers to propel this market forward.
Once the RTH formed a double top at about 104.00, I purchased puts.
I regard this trade as easy and stress free, in spite of Friday's
hammer candle. With rising gasoline prices sure to crimp consumers' discretionary spending, and even Fast Money's Jeff Macke urging investors to flee the retail sector because he anticipates a long and difficult summer, it won't be long before other indices and ETFs can be successfully shorted as well. In particular, I am heartened that the DIA continues its uptend, because it cheapens its puts and brings this ETF closer to its double top at 128.00.
I very much enjoy your blog, especially your comments on the CDN dollar. I think you were wise to take some money off the table.
--Leon Miller
(Montreal, Canada)
Hi Tasko,
yes I do see Gold and Silver testing their highs.
170 might be support in POT but it's hard to say. It all depends on what POT is doing a the time it pullsback. Maybe a test of its 50 day moving average might be support as well. Maybe in a few weeks, the 50 day average will be at 170 making that an even better support level. It's hard to say right now.
Hi Leon,
Thanks for the comments and I agree with your opinion about the retail sector. I hope the trade works out for you..Good Luck
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