The morning bounce was promising, tested and then moved higher through the balance of the day. The Dow and S&P 500 joined Europe in a rally on Wednesday, as both indexes achieved a record close. Europe was higher on stronger economic data in the UK. That is one of the first moves that wasn’t vertically integrated with the US markets in awhile. Maybe we will see the two go their own way and offer some diversification opportunities to investors. IEV gained 0.9% on the day to bounce off the 20 DMA and keep the uptrend in play.
The buyers are still willing to put money to work in the broad markets, but as seen below they are become more discreet about where that money goes to work. Technology has seen less momentum of late as the valuations are said to be over done. True or not is a matter of opinion, but if traders and investors believe it they will rotate money to less risk and better potential return sectors. We have seen some rotation since the Fed announcement they would cut stimulus in September, and again in the October FOMC meeting brought back the potential to cut in December. That is pushing money from interest sensitive assets to other sectors. This is still unfolding and something to watch as we move forward short term.
State of the Market:
The S&P 500 index held above the 1753 level of support and moved to 1770 on the close. Our near term target remains at 1800 on the index and support is 1730 and 1690. The trend of the index relative to direction has been positive enough to keep the index in an uptrend with some sideways consolidation. The downside risk remains a possibility, but without some catalyst or conviction by the sellers, nothing happens short term. Need catalyst to keep the uptrend going.
The NASDAQ remains in a sideways trek as it consolidates or digests to prepare for a further move upside? Or is the index starting to top? The rounding top on the index is still playing out short term and we will have to maintain a reasonable stop and keep moving forward. Apple down 4.6% today didn’t help. Tech is getting press on being overbought and overvalued. This is an area to watch short term.
The Dow rallied back from being down 117 points on Tuesday and today it jumped 126 point to close above the resistance at 15,700. Need to follow through tomorrow on the breakout to confirm the move to a new high. The double bottom pattern setup for the index attains the break and need some type of catalyst short term to make the push. MSFT, CVX and UNH were the push today on the upside. Watch to see how this plays out going forward.
The Small Cap stocks returned to their struggling ways on Wednesday. Holding above support around the 1085 level, but the index is pushing sideways. Long term uptrend remains in play and you will have to be patient short term to see how this plays out. We are not out of the woods on the index relative to selling.
Other News of Interest:
Wind Energy ETF (FAN) has moved back to the previous high and the uptrend remains in play for now. GE is one of the big drivers of the ETF and may be of more interest as a way to play wind than the ETF.
Twitter IPO is the new big thing in the news. I am not going to say anything about the price of $28 per share on the offering and never having made money, but it sounds like the challenge will come as investors and analyst attempt to justify the price relative to the fundamental data. Do your homework before jumping into this stock. I will never say never or discourage anyone from the opportunity, but understand the risk of the opportunity before your expose your capital.
Microsoft stock jumped 4.1% on the release from Reuters that the company narrowed its ‘shortlist’ of candidates for CEO. Evidently I am not the only shareholder who thought that Ballmer has overstayed his worth. One analyst upgraded the stock to a price target of $45 on the news and opportunity of new leadership for the company.
Qualcomm fell 4.2% after-hours on earnings forecast, despite a solid quarter of earnings. The future holds more weight than the past when it comes to the earnings. Investors don’t want to hear as much about what you did as what you are going to do. This will be a stock to watch in tomorrows trading. This will impact the sector and IYZ potentially.
What to Watch Tomorrow:
Trading notes for Thursday will be published early in the morning. Be sure to review them for updates on positions and new trade opportunities on the pattern trading list.