"What a difference a day makes" sang Dinah Washington. "24 little hours."
That classic from the Queen of the Blues is not only timeless, but also a good encapsulation of the temporary ceasefire that had traders out of their bunkers Monday and pushing stocks to their best single-day gain in two months. While the reversal was a welcome relief to investors, it has also heightened concerns that it may not have any staying power.
"It is almost laughable," says independent trader Kenny Polcari, in the attached video. "Really it was nothing more than rhetoric. What's really changed here? Nothing."
For that reason, Polcari's keeping his guard up, because he believes the prior-day's rally will prove to be a moment of trader indulgence. In the meantime, he's eying the 200-day moving average of the S&P 500 as an initial level of resistance, but he's taking more of a watchful approach and advising others to do the same, rather than "chase prices."
While the mood on Wall Street clearly took a turn for the positive, Polcari isn't inclined to support flipping an investment bias based on a "discussion or insinuation that a deal is coming" from Washington lawmakers. That's especially true at a time of continued uncertainty, including strife in Europe and fighting in the Middle East that's pushing up the price of Nymex crude to a one-month high.
"Gas is going up right at the end of the year, the consumer is getting stretched, taxes are going up in January," he says. "Hello? It doesn't sound very optimistic to me."
One stock he is looking at is Apple (AAPL), which posted its best one-day gain in seven months on Monday and is expected to ''churn in this level til the end of the year." He thinks investors who have owned it and profited from its massive run-up will be aiming to take some profits ahead of higher tax rates in 2013.
"So if it's longer term and you're going to hold, I think you just jump right in on the weakness," Polcari says, because he doesn't see anything fundamentally wrong with the company.
- Dinah Washington