Terrible volume (5.8b shares only – 4th weakest of 2012 – down 25% from Fri….11% below 10day ave) – Though SPX failed to close above 50day of 1,347, but we closed well off day’s low and held VWAP all day (was support). Good action. Longs nibbled yesterday and short covering in Techs and ConsDisc evident as well.
One of the BEST signs of the day was the action on Transports – TRAN index (+1.98%) closed above key 50 and 100day as Rails made it back to their recent peak (S15RAIL only 2 points away from all-time high). Always a leading indicator. Move in TRAN index was ahead of FedEx (FDX +1%) earnings today (2nd biggest contingent in index) – also BMO was bullish on Industrials on recent weakness and Oppenheimer +ve on transports.
In general yesterday’s close was a win given all the cautious signs: 1) Spanish 10yr closing at record yld of 7.15% (5y CDS hit 620bps); 2) UK 2yr yield fell to record LOW of 0.182%; 3) €uro struggled all day (closed at day’s low of 1.257) 4) UST 10y still below 1.6% (1.57%); 5) Brokers fell 2%
Techs good action – NDX got very close to 2,600 – AAPL +2% closed above its 50day. AMZN also ended up 1.97% on music service headlines. Groupon (GRPN) ended up 10.8% on an upgrade from MSCO.
Now focus shifts to today’s 2nd day of G20 meeting, Spain’s auction of 6 and 12mos bills, Greece €1b 3mo bill auction, German ZEW, French biz confidence and EFSF €1.5b 6m bill auction, US Housing starts and FedEx (FDX) EPS are today as well)
Let me reiterate the nice breakout in the Dow Transports yesterday. One could play the upside on this for a bucket 2 swing trade via the IYT etf.
The S&P 500 is right at the 50 day moving average, which if history is any guidance wont hold as resistance or support very well. The index is also between the 50% and 61.8% Fibonacci retracement level of the latest larger swing from the May highs to the June lows.
Several individual high beta stocks are also looking interesting from the long side for a trade…see the charts of AAPL and GS below.
I remain in cash and hitting the quick trades intraday but the setup in the transports may be interesting for a bucket 2 long swing trade…I will keep you updated if we execute something there.