Market Getting Extended

The market ripped higher yesterday slicing through that 20 day moving average like butter.  We ended the day right under the 50 day moving average and this morning the $ES_F is up almost 5 points.  Take a look at the $USDX this morning, it’s surging off a strong level of support, but equities haven’t moved.  As well, Deere $DE is up almost 8% premarket after smashing its numbers.  The tone of the market has obviously changed, good news is being met with good market action and bad news, like the PIGS is being swept away in a feeling that everything will be taken care of in time.

I’m not saying this market is completely healthy again, I need to see the financials get some altitude before I make that call, Goldman $GS needs to recapture 160 and Citibank $C needs to hold the secondary offering price.  The fact that JP Morgan $JPM went out and bought an energy trading unit yesterday tells me that Dimon doesn’t think the Volcker rule will ever get passed.  This is positive for the banks and we saw that in the tape yesterday.  Dimon is no fool and he would not have made an acquisition like that if he thought he would have to divest it in a year or two.

Don’t get too antsy to throw risk back on the table just yet, I want to see Gold $GC_F hold above the downtrend line it broke yesterday and equities to show resilience on the next pullback.  If both of these take place I will be looking to load the boat on issues showing relative strength and nice basing patterns over the past few weeks, I’m currently 20% cash.

Stick with tech and food services.

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