After gapping up about 0.5% on the open this morning, indexes have whipped around in a volatile fashion, but remain near levels seen on the open. As of 1:30 p.m. EST, the Russell 2000
(INDEXRUSSELL:RUT) is leading the charge higher, up about 1%, with the S&P 500
(INDEXSP:.INX) lagging, up about 0.4% on the day. Bonds are flat on the day and commodities are significantly higher, led by metals and lumber futures. Since breaking resistance at the 1410 level, the S&P 500 made an intraday high near 1420, which happens to coincide with the highs seen in April and also August. Keep a close eye on this level going forward, as the 1420-1425 area could be a key battleground for bulls and bears.
There have been numerous comments made by politicians today about progress that has or hasn’t been made regarding the fiscal cliff, speculation as to what is going to happen, etc. Given that we’re still weeks away from actually “going over” the cliff, it’s a little surprising to see markets hanging on every single word spoken by those in power. Should the present environment continue, it could be a very frustrating December for traders.
CHART OF THE DAY
(NYSE:CBG) is a commercial real estate play, and as you can imagine, it has performed well this year. Since January, it is up about 20%. What I particularly like about this chart is how it based near the 17.50 level, site of previous resistance in August, and is breaking out of that base on nice volume today. The 21 level is a reasonable initial target for longs, and a broad-based move in the overall market could take this name to 24, a key support/resistance zone on a monthly basis. Should CBG break and close below 18, it would be prudent to exit the position and limit losses.
WHAT I’M EXPECTING
While I maintain my upside bias, initiating new index long positions here and now is a bit tricky from a risk/reward perspective. Continue to focus on stock picking and not market timing. The current political tug-of-war could make it tough to get a defined trend in place until there is some resolution to the fiscal cliff. That said, the mean reversion trade is in play until there is a definitive plan of action that surfaces out of Washington, DC.
This article by Bryan Sapp was originally published on Schaeffer's Investment Research.
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