Tomorrow will definitely be interesting. Will we see more unstoppable window dressing buy programs or perhaps a flat to slightly down day. I think a massive sell-off is the least likely but who knows...
Watch ISM tomorrow could be an excuse to lighten the load before the holiday weekend.
No need to recap the market action today it's the same as yesterday and the day before: gap and go, unrelentless buying, weak dollar, window dressing, etc... they're jamming it.
Market Recap: Another super-strong risk "ON" day with equities closing above 130 and hitting an intraday 131 high. The dollar continued to show extreme weakness remaining in the downtrend it started on Monday. It managed to hang on to 75 but even in after-hours its not looking good. Copper broke out it's consolidation range and gave risk a nice tail thrust. The growing appetite for risk was reflected in UST's continued to sell-off. Markets could care less about the riots in Greece or Obama's less than optimistic progress on the debt ceiling press conference.
For a change we saw financials lead the sectors after some BAC overnight and credit card (MA, V, AXP) news late in the session. We also saw the re-emergence of materials and energy as sector leaders which is what you want to see if you're bullish. The relative leadership out of small caps confirms investors continuing appetite for risk. Out of the 3 indexes its already at it's 50 SMA.
Where do we go from here?
Well I would think after 3 straight strong days we would need to digest and consolidate sideways but there's an underlying window-dressing bid in this market as well as no dollar buyers. We closed near the highs so investors aren't feeling very insecure holding overnight. I believe we have Chinese PMI tonight or tomorrow night so we shall see what that brings.
Market Recap: How do you like them rallies? Well today we went straight up almost in a perfect 45 degree line. In the after hours session we hit a high of 129.94 as the market seemed determined to run over everyone and everything in its way. Again the volume was anemic as it appeared there was little selling resistance for the bulls to chew through. In the process SPY busted through the 20 SMA and almost hit 130 which coincides with the 38.2% fib. We're still in a 4 point range (126-130).
Tech has now broken out of it's up channel and 20 SMA. Small caps continue to lead and are now only a hop, skip and a jump away from the 50 SMA but still within a rising channel.
The dollar continued it's march back to 75 or the bottom of range but finished the day right smack in the middle around 75.50. I'm not sure where the dollar is headed into the end of the week but regardless the bulls didn't seem to care it was risk "on" all day. Copper is still trending sideways awaiting Chinese PMI.
Where do we go from here and what could derail the rally?
Pay attention to the 2 big global macro events we have this week: Greece austerity vote and Chinese PMI. As well as US econ news with pending home sales tomorrow at 10 AM EST, initial claims and Chicago PMI on Thursday at 8:30 and 9:45 AM EST respectively and Michigan sentiment and ISM on Friday at 10 AM.
I'm not sure what could happen tomorrow but if I had to make a call I'd say that 130 holds and we see a minor sell-off tomorrow. What I'd like to see is for us to completely fill the bowl formation over the next few days that's setting up on the SPY 30 minute and then let's see if funds feel like putting on more risk post-4th of July. But as the Rolling Stones said "you can't always get what you want but if you try sometimes you just might find you get what you need"
We saw a strong bounce close to Friday's lows and attempted to break above Friday's highs but finished with an inside day. Today's weakness in the dollar allowed funds to kick-start their window dressing run as we saw names like MSFT and momo leaders put in strong runs. As many traders on the stream pointed out volume on today's up move was anemic so this rally remains suspect especially given quarter ending this week. ATR a measure of volatility continues to climb. The rally seemed to be fueled more from a lack of selling than from an overwhelming push to buy. Treasuries saw a sharp late day which at this point looks like traders still playing the range. On a technical note we're also seeing a lot of charts showing bullish MACD kisses or crosses.
I expect us to continue to trade within the 126-130 SPY range for the rest of the week. It may be possible for us to get above the 20 SMA but I'm not anticipating that at this point. I still think the dollar sees 75 before 77 so my bias is bullish risk assets. There is always headline risk with the Greece situation still fluid, Chinese PMI on Thursday,etc... that can cause a sudden sell-off but I expect any breakdown to fail. As always trade what you see and be prepared for anything.
