Watch how the bank stocks act as the debt ceiling debate heats back up.
S&P (INDEXSP:.INX) futures are off 2-4 handle, this morning, but it's not because of “debt ceiling concerns." The media likes for everything to be neat and tidy, to explain every market gyration with a headline, but that's not the way it works. The S&P needs rest because we just went from 1390 Monday pre-market to about 1462. That's a nice two-day 60-70 handle move.
Congress surprised many observers by averting the so-called fiscal cliff with a last-hour compromise. The sides seemed to remain far apart in the last days of 2012, but compromised on the number for new tax revenue and pushed automatic spending cuts out another two months. The spending cuts issue still needs to be resolved along with the debt ceiling, but so far the market is off to an impressive start to 2013.
Digestion above 1448-1452 would be constructive, and a few days of trading above that level could create a nice launching pad to break above the September 1474 highs. We could even see a pullback to 1440 and be fine, in my opinion. During digestion/consolidation periods there are opportunities to locate relative strength. Pullbacks also create new pivot set-ups so you can add to existing positions and trade around them using a tier system.
Apple (NASDAQ:AAPL) has seen a big two-day move from the break of the downtrend at $515. The next level of resistance now is the 50-day moving average. To change character back to the irrepressible AAPL of old, I believe the stock needs to hold this gap.
Google (NASDAQ:GOOG) wasn't stretched to the downside like AAPL, so the snap back has not been as quick, but it still remains constructive. I think GOOG can recover from its Q4 earnings debacle and have a strong year.
Amazon (NASDAQ:AMZN) is climbing back above short-term moving averages and still acting well. Keep it on your radar for a potential move to all-time highs. Earnings will be key for AMZN over the next couple years as the company has yet to realize its immense earning potential.
Facebook (NASDAQ:FB) is back towards its macro buy trigger range, but after three days up it's tough to chase. The trigger is $28.75-28.88, and a day or so of digestion would be good.
The banks continue to perform well, with Bank of America (NYSE:BAC) standing out with a 20% move higher since our buy trigger at $10. At this point, it's a little bit hard to chase the banks, but look for a strong year from the sector. Watch how these stocks act as the debt ceiling debate heats back up.
Gold (NYSE:GLD) and silver (NYSE:SLV) are both bouncing a bit from oversold levels, but have work left to do. We could simply see a re-test of the 50-day moving average.
The market has seen a strong two-day move straddling the New Year, but now is not the time to get carried away with euphoria. Prudent traders will generally outperform greedy ones, in my opinion.
Scott Redler is long AAPL, FB, YHOO, BAC and short SPY.