Technology Stocks to the Rescue
Before I begin my usual market commentary, I'd like to remind you of a very special offer from my friend and colleague, Andy Crowder.
This Saturday, Andy will reveal information about a new options trade for free! If you're interested, I urge you to click here and sign up to the pre-event list today. There's a limited number of spots available, and I know they'll fill up quickly.
The market popped again yesterday. The gains were larger on Monday, but it was still a strong showing by the bulls to rally the U.S. indices for a second straight day.
Technology stocks were the leaders again, and our long position in Apple (NASDAQ:AAPL) has done great. But a few banks also put in nice sessions. And Direxion Daily ETF (NYSE:FAS), Goldman Sachs (NYSE:GS) or Bank of America (NYSE:BAC) deserved to be put on my screen as a possible trade. Volume wasn't particularly heavy, but buyers outnumbered sellers by 3 to 1.
Despite the day of gains, the indices actually started lower. And SPX immediately sank to 1155 at the open. The selling didn't persist. And the bulls quickly supported 1155, which I thought would be the low, and rallied SPX up to 1175.
Over the past three weeks I have spoken about how important the 1175 area is for traders. The group that successfully controls 1175, whether it be bears or bulls, will be able to dictate the short term trading trend.
Last week the bulls lost the 1175 support area, and SPX quickly fell to 1135. Now bulls need to fight hard to get it back. And should they take it out, SPX could be on its way back above 1200. On the other hand, the bears must show some defense of that 1175 zone today if they are to take the market lower this month.
I favor the bulls, and another trip back to 1197. But I've increased all of our stop losses in case the bears show-up in force today and prevent a break out past 1175. If the bears are able to protect 1175, SPX is headed for 1115 - and our portfolio, with five open long trades, would be negatively impacted by such an event.
The next two days are fairly heavy with economic data. Today, PPI and retail sales numbers were announced ahead of the bell. PPI was expected to show a 0.2% increased while retail sales for August were expected to show a 0.3% increase. Both metrics posted a 0.1% increase and will have a minimal impact on trade today.
Tomorrow CPI and industrial data will be announced. CPI, which is a measure of price inflation, is widely expected to show a 0.2% increase for August. And as long as that number doesn't come in hotter than 0.5% the market should like it.
The bulls won't get much help from Asia today where the indices were mixed. But Europe is rallying hard this morning and those indices could end the session up 3%.
The big day in Europe stems from optimism that Greece and Italy will receive financing and future bailouts will go more smoothly. Additionally, Moody's cut credit ratings for a few European banks. But the cut was expected by investors. And the downgrade was only one level which could have been less severe than investors expected.
