The market made a choppy but steady climb today until about 1:30 when it peaked at the 775 range on the S&P, while the DOW was up 150+ points at that point. It was too much too fast, and serious profit taking set in for the last couple of hours of the day. Techs were a drain on the market all day with AAPL and the Q’s selling off from the start aided by a downgrade on SNDK, as well as weakness in INTC and MSFT, before attempting a noon recovery which just got them back to end before the late afternoon slam.
The Ag stocks had a good day led by MON +3.62 and energy stocks did as well, up soundly across the board as oil was up slightly. Opposite of Friday, the solar stocks wanted to sell all day with FSLR getting whacked for about 6 points in the after-market as I write this. The morning move up was once again led by the financials until the pm selloff, when they rolled over hard, led by the remaining brokers, GS and MS. Percentage wise C and FNM were both up about 30%, but are still penny stocks. There were some great afternoon short trades if you were nimble. Precious metals were slightly lower on the day. The net result was the SPX down a couple of points and the DOW down 7.
After hours AA cut its dividend to $.03 from $.17 and announced a large stock offering, which dropped it about a point so that could cause us some additional weakness in the morning hours. Permabear N. Rubini called the recent move up a ‘dead cat bounce’. As I stated in the weekend report, we were getting over-bought in the short term despite being extremely oversold on the weekly and monthly charts. I took my own advice and sold most my longs in the move up this morning and in fact put on a small short position with some Q puts.
We need to see the S&P not break too far below the 740 level, but as shown, we have some horizontal support at the 730 level with even more at the 710 area with our original up trend line. As you can see on the chart, the steep move up was unsustainable for much longer, just too steep. As we approach these support areas I’ll be watching the market closely to see if we can initiate some long positions again.