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Market Turns Red After BoJ Inaction

Scott Redler

World markets are swimming in red this morning after the Bank of Japan decided against new policy measures to soothe volatile markets. The Nikkei dropped 1.45% in the overnight session, while most European indices are down around 1.7%.

Yesterday, the Nikkei bounced back around 5% after a period of extreme weakness. The index, which at one point was up 50% year-to-date, corrected 20% off highs (which many consider bear market territory) but rallied heading into the BoJ meeting, where many expected new accommodative steps to be taken in light of recent erratic action. Goldman Sachs (GS) even came out and said to buy Nikkei futures into today's rate decision, which is just the latest in a long line of... head-scratching calls.

S&P futures are down 15 handles, unable to shrug off weakness in foreign markets this time around. Yesterday we had an inside day after an eventful week to kick off June, and many expected volatility to cool down heading into the heart of Summer. However, in today's new normal of meddling central banks, volatility could be here to stay.

Early last week the market hit the lows of its biggest correction of the year. Although the dip found support at the 50-day moving average, the "good book" tells you not to chase longs after a 40+ handle move from Thursday's low. Friday's extension and yesterday's open was more of a chance to take some profits and trail stops, rather than a time to chase new longs. A lot of stocks have had large travel ranges from Thursday's low to yesterday's open into resistance.

Today it will be interesting to see if we can come off the lows and pare some of the early morning losses. We will be near gap support from Friday's jobs report-inspired up opn, which will give us a level to trade against. We will use that level to give us clues about "what this market is made of" in the short- to intermediate-term.

If the S&P 500 ETF (SPY) can hold above $163ish, it would show commitment to the recent snap-back off the 50day MA. If we don't hold that level, it could create a choppier environment and perhaps a retest of that 50-day moving average.

In a sea of red, you always look to stocks that closed strong the prior day to see if they can go green and help lead us off the lows. Several notable tech leaders fit that description.

Google (GOOG) had a really nice move right to our resistance target of $890ish. If it can hold above $880ish, I would deem that constructive. If you sold some into Day 3 of the bounce yesterday, you could look to buy a dip here.

Amazon (AMZN) has seen a very nice move since last Thursday and through our $272ish trigger buy area. If you sold some yesterday or want to pick some up at lower prices, perhaps see if you can buy back around the $275-278 area for a retest of the breakout. However, if that area doesn't hold, AMZN will relinquish some of that bullish composure.

Netflix (NFLX) is getting very tight and looks ready for a move, in my opinion. As long as it stays above $210ish, I believe at some point it could break above $224-225. I have noticed that sometimes this stock likes going up in a sea of red, so see if early morning volume comes in.

Apple (AAPL) sold off after its annual WorldWide Developers Conference yesterday. There were some good upgrades introduced to several of its software and hardware, and a streaming internet radio service introduced, but the market did not appear impressed as AAPL sold off 2% from its highs of the day. If it doesn't bounce back quickly today, it could fall off most traders' radars (if it didn't fall off already). The $432ish level is pretty big support--if AAPL closes below that level, take some care.

eBay (EBAY) had its first potent bounce back yesterday. perhaps watch to see if it tries to go green today.

Yahoo! (YHOO) still acts well, and needs to hold above $26.45 to maintain strong bullish composure. The company will host its annual shareholder meeting today, and will likely see some smiling faces after the stock's strong performance under new CEO Marissa Mayer.

SanDisk (SNDK) looks very strong and almost near breakout highs. If the market lets stocks break out, I think this could be near the top of the list. The long action area stands around $60ish.

Facebook (FB) finally saw some strength yesterday and has its shareholders meeting today. If it can hold yesterday's gap around $24ish, perhaps it could act a little more constructive and see some higher prices.

Tesla (TSLA) did a decent job absorbing the negative Barron's article, opening lower and rallying back into positive territory. For me to trade it again, TSLA will now needs some time to set-up again. The $96ish area is some support, then there is more significant support at the 21-day MA, which sits around $90.5. If it can go green today, there is some resistance at $102.90.

The solar group group was very strong yesterday. See if the groups gets any interest today in a down market. I will go over this group in the Morning Call video.

First Solar (FSLR) was mentioned on our Price Point Sheet Friday as a breakout candidate out of the upper wedge pattern. The stock made that breakout move yesterday and triggered our listed buy price of $54.67, going as high as $56.70 and finishing the day up 6.22%. The stock closed on highs, so look for continuation as it has room to $59 before it runs into the next resistance.

SunPower (SPWR) also saw some relative strength yesterday and registered impressive gains of 9.2%. The stock held its 21-day during the most recent pull-back, showing commitment to the upside. It has cleared some resistance levels on its way up and looks poised to see higher prices as long as it holds above $20.35-20.65.

SolarCity (SCTY) has been on our radar for a potential bounce, but perhaps due to anxiety over today's IPO lock-up expiration, the stock has been a bit lethargic. However, SCTY has based at the short-term support level of $35.50, so it hasn't completely broken down. Generally speaking, IPO lock-up expirations may be deemed bullish because a large number of new shares hit the float, but we have seen some squeezes around lock-up expirations in the last few years. Keep an eye on this name and obey technical rules. The longer it holds the $35.50 support level, the higher probability we could see a quick rally back to $45.15ish.

LDK Solar (LDK) saw an igniting move yesterday after several days of consolidation above its 200-day moving average. LDK closed the day up 14%. The company is reporting their earnings before the open today, so keep this stock on your radar as there could be some volatility.

JA Solar (JASO) saw a nice rally yesterday after holding its key support of $6.70 for a few days. JASO gained 13.5% on the day. It has reached some resistance from the micro downtrend since May 24, and is down with the market this morning like most stocks. For there to be continuation from yesterday, it would need to get above yesterday's highs of $7.87. The next resistance area beyond that would be the $8.81-9.45 area.

It is interesting to note that Homebuilders (XHB) didn't really participate in the bounce back as much as you would have thought. Toll Brothers (TOL) and Lennar (LEN) look very unhealthy.

The Inverse 20+ Year Treasury Bond ETF (TBT) is now over $70 and continues to look good for higher prices. Could we be seeing the early stages of the great rotation. The bullish bond ETF (TLT) conversely looks a lot lower in the coming months.

Metals continue lower. Gold (GLD) recently got rejected by $136.50-137.50 and is now heading back towards very important support/ We've had multiple inflection points for adjustments recently: 1)the $161 pivot on Feb 11th, and then 2) the $149.50 pivot on April 12th. If you are still involved, $130.50ish is the next BIG area.

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*DISCLOSURES: Scott Redler is long NFLX, FB, P, BAC. Short SPY.