Bank of Americal looks strong; Google and Amazon have been digesting.
Markets pushed through yesterday's highs and then reversed course to finish in this morning's gap. The pivot on the S&P (INDEXSP:.INX) was 1434 and we pushed above that with some momentum after the Fed announcement, but we never hit 1440. I don't necessarily think today marked the high of the year, but as we get closer to the holidays I always tend to think it’s prudent to clean up some size and loose positions.
We have seen reversals and breakout/breakdown failures several times over the last few weeks, so it's hard to put too much emphasis on today's price action. For short-term bullish composure to remain intact, the 1415-1420 level needs to hold.
The banks have been a source of strength over the last few weeks and several pulled off their highs today. Among the three I have been focusing on, Bank of America (NYSE:BAC) has been the strongest, followed by JPMorgan (NYSE:JPM) and then Goldman Sachs (NYSE:GS). Two years ago if someone would have told you that order, what would your reaction have been? But we trade the price action, not the brand name. Even with strong stocks, right now selling rallies and buying dips seems to be the best approach. Every now and then we are seeing a stock break out of a constructive pattern.
Apple (NASDAQ:AAPL) still shows no commitment to rallies and investors seem to be getting a bit anxious. The stock entered yesterday's gap but did not fill it, so it is holding its neutral-to-bullish composure by a thread. The longer this stock stays below $549-555 I believe the higher the probability $505-518 comes back into play.
Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) are simply digesting, which I think is healthy in this environment. Neither feels inclined to get major momentum and break above recent pivots, but if the market gets some sustained momentum they could become strong vehicles.
Fed Chairman Ben Bernanke maintained a very dovish stance in today's FOMC announcement. The committee decided to increase the size of its monthly asset purchases by $45 billion to offset the effects of the expiring Operation Twist. The new $45 billion, which will be focused in US Treasuries, will add to the already-underway monthly purchases of $40 billion in mortgage-backed securities to create a powerful monetary stimulus program. Bernanke focused heavily on the Fed's employment mandate, saying he will be very accommodative until unemployment is back to a reasonable 6.5%.
Stocks and precious metals ticked up in the immediate aftermath of the announcement, but faded during the ensuing press conference with Bernanke. The newest measures by the Fed are sure to be controversial, but we have to focus on the things we can control -- our process and approach. We cannot control our environment, we can only adjust to the market we are given. Spend more energy learning and less complaining, and you'll separate yourself from the herd.
Scott Redler is long NFLX, XHB, BAC, JPM, MGM, INTC, FB, ZNGA. Short SPY. Traded but flat AAPL, LULU, GCI, GS.