World markets continue to bounce back (for the most part) from Monday's lows, as European indices are up anywhere from 1-2% and S&P futures are up 8-10 handles. Yesterday the S&P reclaimed its 100-day moving average thanks to a healthy gap up, but the action was lethargic during the session. There could be some window dressing at play in this snap-back, so it's a little bit hard to trust. I will continue to be in "tactical mode," taking trades more quickly than usual.
S&P futures are near 1593ish pre-market. If we can get above that level for 30-60 minutes perhaps we test the broken trend line around 1598-1606 with the 50-day curling down at 1618. There is some micro support that stands at 1584, and then at the 100-day around 1579. In order to keep this bounce intact I believe this area should hold. If we break below it, you have 1560 and other levels that we will talk about at another time.
Metals continue to get crushed. The problem with gold bugs is that they use opinions and tend to ignore all the technical signals that could have saved them a ton of money or even make them some money short. There's been a ton of action areas to make adjustments, we've listed them many times: GLD $161ish on February 11th, $149ish on April 12th, $130.50 on June 19th, and then yesterday at $123ish.
I never like to see any market participant in pain, but most of this could have been avoided. Today Gold (GLD) is down another 3.7% or so near down near $118.50. If you have remained in your shorts, congratulations. This, in my opinion, could be a prudent spot to cover some. There actually might be enough blood on the street to take a peak long, something I haven't tried to do for months. The $115.50-117.50 level is another huge support area.
Silver (SLV) also has been decimated. Like I said for GLD, I think this could be a prudent spot to cover. It's actually indicating right where it started its major run back in September of 2010 -- $17.50-18.50 -- and could be worth a look long due to the possible capitulation selling we could see today.
In today's Morning Call we will look at some banks and homebuilders that had a decent bounce yesterday to figure out if there are more opportunities.
Goldman Sachs (GS) built on Monday's snap back with 1.5% of gains on Tuesday, and the bank successfully reclaimed its 100-day moving average. It has some room to the 8- and 21-day MA at around $157ish to the upside. For traders it was be nice to see GS and the bank stocks regain some power.
Bank of America (BAC) outperformed the market and its financial sector with 3% of gains yesterday. The bank reclaimed its 100-day and closed well above it, showing some relative strength. A break and close above the 50-day at $12.88 could add some fuel to its rally.
JP Morgan (JPM) continued to show its leadership as the bank is already back above its 50-day MA after finding its footing at the 100-day on Monday. It has some room to the $52.80-53.50 area.
Zions Bancorp (ZION) was highlighted in our Off The Charts newsletter on Monday as stock to potentially key on once the market found its footing. I think the stock could see additional gains above $28.20. It did hit our trigger buy price yesterday and went as high as $28.65 to get back to highs. ZION closed on highs, signaling potential upside follow-through. A break above $28.74 would mark new 52-week highs.
M&T Bank (MTB) showed relative strength during last week's pull-back in the market and gained almost 2% yesterday. After holding higher since mid-April, the bank looks poised for a breakout above $107.50. MTB has shown lots of momentum lately so keep an eye on this bank as it has a tight pattern in place.
Homebuilders showed relative strength as new home sales topped expectations increasing from an upwardly revised 466,000 (from 454,000) in April to 476,000 in May.
The Homebuilders ETF (XHB), after holding its 200-day on Monday, showed relative strength with 1.5% of gains after better-than-expected new home sales data yesterday. XHB has some room to the 100-day at $29.80ish.
Toll Brothers (TOL) held its key support of $30ish on the recent pullback and regained some upside momentum after the relative strength in this sector yesterday. TOL closed the day up with small gains of 0.35%. Reclaiming the 200-day at $34 and the 100-day at $34.40 could add some fuel to its rally as it looks like the bulls wouldn't want to give up on this homebuilder yet.
Lennar (LEN) wasn't able to hold its earnings gap yesterday, which is a little bit troubling. In general, LEN doesn't have the best-looking chart. However, the stock has some room up to the 200-day at $39.10.
KB Home (KBH) looks a bit more technically healthy as the stock found support at the 200-day and bounced.Yesterday the stock bounced well, posting 1% of gains and knocking on the door of the 8-day MA. A break and close above this key short-term moving average at $20.23 could show some commitment to the upside.
PulteGroup (PHM) saw nice gains of almost 4% and outperformed its peers after dropping below its 200-day on Monday. PHM is hovering around this key moving average. A close above it at $19 could restore at least some short-term confidence in this stock.
A few quick hits to keep an eye on.
Tesla (TSLA) saw a healthy rest yesterday as the stock finished the day with modest gains of around 1%. The longer it stays above its 8-day moving average, the higher probability I think we could see a breakout move through $107.13. Keep an eye on this stock as it moves fast.
Blackberry (BBRY) has shown some impressive relative strength this week despite being battered and bruised on a longer-term basis. It has reclaimed all key moving averages, including the 100-day yesterday. Recent pivot highs of $15 would be one of the last short-term obstacles to the upside for this stock. A break and close above this resistance could bring in some buyers. Earnings are on Friday, so know your risk.
First Solar (FSLR) saw a strong snap-back yesterday right off the open and closed on highs to register almost 8% of gains yesterday. The solar stock has some room to the 50-day at $47.50ish until it runs into some resistance.
At this point we are on Day 2 of this snap back. We talked about the potential retest of the S&P 1598-1606 area, or the 50-day at 1618ish, and we are two-thirds of the way there. I would continue to take trades as I'm not sure if we've seen the Summer lows.
I come in today with five longs, and I anticipate leaving with fewer, especially if we extend toward those resistance areas.
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*DISCLOSURES: Scott Redler is long SPY, YHOO, JPM, GS, BAC
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