We're starting to run out of ways to phrase it, but this market continues to grind higher. Another gap down was bought this morning after S&P futures were down as many as seven handles pre-market, and the index finished narrowly positive. In the end, all major indices finished within 0.1% of the flat line as we head into the first 2013 monthly options expiration tomorrow.
Typically traders like to take a step back on options expiration due to potential pinning action that is often tough to navigate. I think that cautious would make particular sense given where we are in the market. While we like to follow trends, it's hard to initiate new buys at these levels without a pull-back. Every time it appears we are starting to pull-in a bit, gap down gets bought or the market reverses back to the upside. As a trader you have to be patient enough to sit on your hands at times, and have a keen eye to identify the sector rotation.
The financials continue to lead the market, with Goldman Sachs (GS) making new highs again today. The company has re-emerged as the sector leader after earnings, and tacked on another 0.9% today. JP Morgan (JPM) also showed resilience after yesterday's bearish candle, erasing most of those losses in a 1.1% surge today.
Today you also saw some money rotate into the oil service sector as we talked about in today's Morning Call article. We saw impressive moves today from stocks like Schlumberger (SLB), Halliburton (HAL), EOG (EOG) and Pioneer (PXD). This is just the latest example of the sector rotation that characterizes strong bull markets.
The 3-D printers have been firmly on traders' radars over the past few months, and have become even more volatile in recent weeks. The sector has been on fire and was even touted by President Obama in his State of the Union address, but with a sky-high valuation there are a lot of skeptics. Citron Research, a company known for issuing bearish articles on various stocks over the past few years, released a negative piece on 3-D Systems (DDD) today, causing downside momentum to increase before a late-day relief bounce. DDD closed the day down 4.36%.
Stratasys (SSYS) has been the much weaker name in the sector. Since we highlighted a bearish ascending channel in the stock last week on Off the Charts, it has sold off around 12%, and dropped another 6.08% today. I wouldn't be initiating new shorts here, but these stocks look poised to give good, tradable two-way action for the foreseeable future.
Marc Sperling was all over Blackberry (BBRY) on its gap down this morning. He tweeted that he liked it early, and bought it, which you can see reflected in the Virtual Trading Floor(R) in real-time as it happens. The stock went from negative to finish the day 7.79% higher.
Keep things light on options expiration Friday, and we'll get ready to attack the market again on Monday.
*DISCLOSURES: Scott Redler is long GRPN, MSFT, BAC, GE. Short SPY.