Welcome to the Second Quarter. Will the S&P have double digit gains like the 1st quarter? Probably not. But with volatility starting to edge up into the end of March, there should be opportunity nonetheless. The first week of Q2 should be an interesting one.
The S&P broke into new closing highs and now we will see if it can do some work above it. The first floor to trade against is now the 1561-1564 area. If we digest above this then we watch pivot resistance at 1570 then the intraday high of 1576 back from 10/01/07. Pivot support moving forward is now 1538-1548. There is no reason to get bearish unless we break and close below this at some point.
Below are some technical points I will go over in today's Morning Call in some sectors:
Utilities (XLU) outperformed the market recently and saw a nice breakout on Thursday. This sector lagged the market during the last two quarters of 2012, but slowly made a methodical move back to the upside since January. On Thursday it acted as the strongest sector and put in a new high at $39.14. We are seeing some defensive sectors start to lead, and we will watch closely to see if that continues.
Industrials (XLI), after leading the market during January and the first half of February, are taking a break and consolidating in a higher level range. It's still wrapping around its 8- and 21-day moving averages and trading above other long-term moving average, which is constructive. A move through $42.16 could open the door for higher prices.
Financials (XLF) have lost some steam recently but found good support along the 21-day moving average, showing some commitment. XLF needs to get above $18.30 to get back in motion.
Homebuilders (XHB)- is also taking a break after its fast "recovery" rally since February 26. The homebuilders ETF has held higher levels of support and is trading around its 8-day. The longer it stays above prior breakout level of $29.50, the higher possibility we could see a break above current pivot highs of $30.66.
The Nasdaq ETF (QQQ) traded in a range for all of March until Thursday when it poked its head up a bit and pierced through the intermediate resistance level of $69. We could see the index ETF play some catch-up to star the quarter.
Tech has been a mixed bag.
Apple (AAPL) gave us some nice action the last two weeks. Two call spreads worked out well on a nice move from $435-$440ish up to $465+. But after breaking above the downtrend, AAPL failed to hold its 50-day, giving most traders like a me a reason to exit. It might be worth a look down here but is not compelling like the first time. A spot I might look to buy for a trade is $438-$442, although I am not enamored with it like the last time it was here.
Google (GOOG) has been bending and trickling lower for the last month or so. As soon as all the $1,000 price targets started coming in it seemed to weaken. It tried to find some support around the $801.50 - $803.50 but couldn't get any traction, then it resolved to the downside below it. Use $793.30 as a pivot then the 50-day could be a spot for a small bounce at $787, but it's a bit broken regardless.
Netflix (NFLX) looked like it was finally going to break out last week then failed to hold again. It still looks decent but tricky at times. If it can stay above $186-$188 maybe it could try to break out again above $197-$198.
LinkedIn (LNKD) has been digesting well but is very quiet. Most traders have it on their radar but it should hold $172ish if it wants to keep upside momentum. The 50-day is down at $154.30 so take care.
Facebook (FB) finally ignited last week on Wednesday but gave back almost too much Thursday. If it's any good it should not close back below $25.40ish, in my opinion. It has a lot to prove.
Amazon (AMZN) stock had a spirited bounce after it got everyone bearish again. AMZN is very tricky. It's in the middle of the range and not very compelling. Maybe wait until we get closer to earnings.
eBay (EBAY) had a big day Thursday as it had its first analyst day in years. It was upgraded again today. This igniting bar repairs the chart a bit, and as long as it stays above $53ish it could get some attention from intermediate-trend traders.
Sprint (NYSE:S) is not a sexy stock, but gave us a nice entry around $5.80 and a nice entry above $5.96. It digested well and seems like it could go again. Don't overtrade it; f you are playing it, be patient.
Yahoo! (YHOO) is consolidating above its 8- and 21-day moving averages. Upper support is $23.17ish. It's been a nice swing trade in 2013 with multiple set-ups.
Salesforce (CRM) broke above $176 Thursday and it's been acting better since declaring its 4-for-1 stock split.
Financial stocks are pulling back into some key support levels.
Goldman Sachs (GS) has been acting better since building a base above current lows of $144.70. It's having some resistance from the 50-day at around $150. A break and close above this level could help the stock regain some support and revisit the next resistance level of $153. Look here for more clues in the financials.
Morgan Stanley (MS) is trying to hold above the earnings gap from Jan 18 as it touched this level a few times then bounced. It's having some selling pressure from the 8-day moving average at around $22.50. The range is getting tight and we could see a resolution of either a breakout or breakdown soon. A close below $21.78 could bring in more sellers.
Wells Fargo (WFC) ignited on March 15, then the stock is saw a controlled pull-back into its 21-day moving average where it found some support last week. The longer it holds above this short-term key moving average, the higher probability we could see a bounce back to highs.
Bank of America (BAC) is weakening since hitting the highs of $12.94 resistance level. It has fallen below the 21-day moving average last week, but is still holding above 50% Fibonacci retracement level of the recent rally from March 1 to March 19. A close below $12.11 and could lead to the 50-day at $11.84ish, which could then be a spot to buy.
BlackRock (BLK) has a good-looking chart. The stock is trading above all rising key moving averages. BLK has stayed above its 50-day since October 2012, and every time it touched the 8- or 21-day it found good support and rallied. The stock is consolidating at highs and looks poised for a potential breakout above $259.50.
Metals are hanging by a thread. Gold (GLD) support stands at $154.22. I have no interest right now. For this to change it needs to ignite through $156-$157 on very big volume, in my opinion.
The ECB meets on Thursday which will have some more importance than it's had in a while. ISM is today and jobs data is on Friday. Most are looking for non-farm payrolls at 190K and privates at 200k. We will likely need to see consistent $250k+ for the Fed to change its rhetoric.
Also keep your ears open about North Korea. It seems like it's getting a bit more real, rather than just propaganda and chest-puffing.
I would not look to revenge trade the Second Quarter if you didn't perform in the First Quarter. Instead, build on what you did well, and work on what you did poorly. We all learn every day and need to keep evolving.
Also, it's something a little bit different, but look for our special interview with musician CeeLo Green, which will likely be aired Thursday.
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*DISCLOSURES: Scott J. Redler is long SPY, BAC, MGM, S, F, DDD call spread.