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MV Weather Report: S&P to Peak Through Clouds?


Rain or shine, we review the day's biggest stock stories.

The bond market was once again the story of the day, but this time the news was positive. The 30-year auction went off with a high yield of 4.729% with a bid to cover of 2.68x and 49% indirect bidders. The auction was seen as better than expected by investors and it led to a brief rally in the market.

Brief rally meaning the S&P 500 broke above the oft-mentioned 950 level, and traded to a high of 956. However, a bear raid at the close knocked the S&P back to 944. Isn't it normally the other way around? Don't the bulls take the market higher during the final hour, exhausting all hope for the bears?

Needless to say, the strongest sector today was banking on the back of a Bank of America (BAC) upgrade. The stock traded strong all day and helped lift the whole sector -- JP Morgan (JPM), Wells Fargo (WFC), and PNC Financial (PNC). Tech was weak again today as names like Google (GOOG), Apple (AAPL), and Amazon (AMZN) traded lower.

Here is a Buzz from Professor Jeff Cooper on the significance of today's trading session.

"Given that today is Misdirection Thursday when often times the arbs misdirect the direction for expiration on the roll out of the new futures contract, my gut is that it is NOT the high of the day and that there is a better average likelihood of seeing a trend day up IF S&P 950 is captured and holds.

"Consequently, if the S&P scores a 'breakout' over the current line formation since the June 1st 'breakout,' given that this is the Thursday the week before expiration and may be a misdirection serving the arbs agenda, I would be on my heels watching for continuation on the important Friday close of the week: follow through is key -- especially at this well watched 950 level."

The S&P 500 failing to close above the 950 level for the 8th consecutive session is a victory for the bears. It's often true that the more resistance is tested, the easier it becomes to break. However, misdirection Thursday closing positive, potential head winds in the debt markets, and the overall euphoria in the marketplace worry me.

Here is a Minyan Peter buzz on the topic.

"And for what it's worth, I saw the word "euphoric" earlier today used to describe the taxable credit markets.

"It all reminds me of the summer of 2007 when the word du jour was "Goldilocks". (And as I recall, those were quite the bears who followed her home.) Not saying it all can't melt up further from here, but unless man develops gills, I don't know how much longer the continuing unemployed can swim underwater.

Too much debt and high unemployment make quite the pair. And from where I sit, it feels like these two have just started dating."

Something to think about.

Have a great night!
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Position in BAC and AMZN

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