Markets Bounce Back, But Remain Volatile

Today was another interesting day for stocks. The up and down day ended positive for the major indexes, but it didn’t come without anxiety. The news from Asia was negative relative to PMI and Europe didn’t fare much better. That set the negative tone, but following the selling in biotech the last couple of days they did manage to hold steady today. The opposite of Monday all ten sectors of the S&P 500 index were positive today.

The triangle pattern has widened on the S&P 500 index, but it illustrates the day-to-day uncertainty we experiencing currently.  We still have to let this all play out, but there are some signs of hope on the horizon that a direction is forth coming. Our short positions floundered today, but we are going to hang with them for now with our stops in place. Until the longer term uptrend is broken we have to trade the shorts on the test and keep our stops in place on longer term positions until the market validates it is time to exit. This is the importance on knowing your objectives for each position and taking what the market gives both short and long term.

Moves worthy of NOTES:

Europe (IEV) bounced 1.3% today to follow through on the bounce off support on Monday. Be patient here and understand the volatility that comes with the global markets currently. The EFAE index (EFA) enjoyed a bounce of 1% as well on the day. Emerging markets (EEM) cleared resistance again at the $39.50 level and continued higher. There is plenty of challenges facing the sector, but the move is worth our attention and potentially a trade. China (FXI) despite the negative data continues to move higher off the recent lower and is back at the 50 DMA. A move above this level could off a upside trade opportunity short term.

S&P 500 index moved through the 1850 level to close at 1865. We still need to get through the 1874 resistance on the upside from last week and establish the upside trend again. Industrials (XLI) were up 0.9% to lead the sectors on the upside. Energy (XLE) and Healthcare were both up 0.9% to ease some of the recent selling. Financials were the laggard as the closed even on the day. Still lacking leadership in the index and for now we continue to be content to watch as it all plays out.

Semiconductors were up on 0.5% on the day, but the continue to lead the technology sector to higher ground. The balance of tech is struggling with the internet (FDN) sector move down more than 8% off the recent highs the last two weeks. The pressure from software (IGV) has weighed on the sector as well.

Apple managed to gain 1.3% on Monday and today followed through with a break of the downtrend line off the December highs. Volume has been good on the move and our position that we added last week is now starting to pan out. Target near term is $560 with some hope of a return to the $575 mark. The rumored talks with Comcast about a streaming television service that would use Apple’s set-top boxes got the upside moving and now the iPhone 6 due out as well as other strategic deals that Apple is working on have restored some confidence in the stock near term. Worth watching and may be worth owning Apple stock if the upside progresses.

NASDAQ 100 index attempted to recover some of the damage as Seagate, Cisco, Alexion Pharma and Celgene all were solid leaders for the index on the day. Tomorrow is a flip of the coin as the last two days of volatility have created more questions than hope. Watch and be patient on the move. 

I discussed in the weekly update on Saturday that the lack of clarity remained an issue, and that we would be better off taking a break than fighting the current market movement. The uncertainty has led to some selling, but the selling is still bringing in buyers as seen today. When that merry-go-round stops the market will drop and investors will then decide what valuation works best for the markets looking forward. Practice patience for now and go have some fun versus beating your head against the market.