There is very little tradable volatility in the indices right now.
The S&P finished narrowly positive Wednesday thanks to a late push higher into the close. Despite some slight intraday weakness, there still appears to be no rush from investors to take profits at these upper levels. Bulls are getting spoiled with the price action so far this year, as even the slightest sell-off can make you anxious. Stocks opened higher this morning and extended early in the session, but trended lower for much of the day before the last-minute surge.
At this point, it is becoming very hard to identify compelling swing trading set-ups. Some of the longest lasting bull markets never give you a clear way in, and that could be what we are seeing here. Still, when risk-reward parameters don't meet our desired ratio, we would rather sit on our hands and wait for more clarity.
The biggest thing to note, and something we keep harping on, is that this is a very stock specific tape. There is very little tradable volatility in the indices right now, but if you keep your eyes open and are willing to rotate frequently through the in-play names, there is some action.
The 3D printing stocks continue to provide great two-way action, and overall are starting to look a little fragile at these upper levels. Value folks shake their head at the multiples being put on the sector right now, but that is something you often see in emerging technology. The president mentioned the sector in his State of the Union last night, which led to a gap up most notably in industry leader 3D Systems (NASDAQ:DDD), but it was a roller coaster without much conviction to the gap up intraday. DDD sold off hard to fill the gap in the late-morning, but was able to drift higher into the close to finish with healthy gains.
Stratasys (NASDAQ:SSYS) was markedly weaker than DDD. The stock broke down hard yesterday. Like DDD, it then filled the gap up and saw some heavy selling volume before rebounding enough to get to positive territory into the close. ExOne (NASDAQ:XONE) also filled its gap to the downside.
Apple (NASDAQ:AAPL) ignited early after a gap down, but couldn't build on that early strength and faded to finish near the flat line. Your attention is best devoted elsewhere.
In tech, Amazon (NASDAQ:AMZN) was the standout today, breaking higher out of descending channel. The descending channels by nature are downtrends, but when they are broken it can ignite momentum in oversold stocks, and that's what we saw with AMZN. The stock finished the day up 4.16%.
Two standout earnings stocks -- Netflix (NASDAQ:NFLX) and LinkedIn (NYSE:LNKD) -- also continued higher today, while a weak earnings stock -- VMware (NYSE:VMW) -- bled lower, keeping with our thesis about how to treat earnings gaps. If a stock gaps up or down, and can't quickly enter that gap, we feel the best trade is to trade it in the direction of that gap.
Don't fight the trend, but don't fall asleep at the wheel. Continue rotating through the best-set ups and take either a long-term approach or short-term approach, don't get stuck in between. These are the same concepts we have been talking about for the last few weeks, but they bear repeating.
Scott Redler is long GM calls, GE, BAC, MSFT, TBT. Short SPY.