Todd Harrison: Sector Rotation Dominates the Stock Market
What to watch on Freaky Friday.
The final phase of our five-session set is upon us as the lack of negative news, continued momentum, and the specter of quarter-end combined to give the bulls the ball out of the gate.
We scripted the road map over the last week or so, and the banks remain the primary driver, with BKX (INDEXSP:BKX) 71.50 the technical backstop.
The collective focus now shifts to the transports for a move through TRAN INDEXDJX:DJT) 7600, which will provide yet another technical blessing of the breakout through S&P (INDEXSP:.INX) 1850, NDX (INDEXNASDAQ:NDX) 3640, and RUT (INDEXRUSSELL:RUT) 1182. Those levels have been tested a few times and held like a champ; upside targets include S&P 1960 and BKX 77, if and when.
Of course, every day is a new day, or that's what I've been told, and high-beta is getting hit hard on this Freaky Friday, with LinkedIn (NYSE:LNKD), Netflix (NASDAQ:NFLX), Tesla (NASDAQ:TSLA), Amazon (NASDAQ:AMZN) and Priceline (NASDAQ:PCLN) currently dancing in red dye. Biotech is also getting smacked, and as that sector led the tape higher, we should note that it's trading well under IBB (NASDAQ:IBB) 260 support.
The bulls maintain this is shaping up to be the same type of sector rotation that we saw yesterday (into semis (INDEXNASDAQ:SOX), telecom (NYSEARCA:IYZ) and banks (BKX), and away from biotech (IBB), REITS (NYSEARCA:IYR), Utilities (INDEXNASDAQ:UTY) and Health Care (NYSEARCA:IYH) but that remains to be seen. As we know, sector rotation is a lot healthier than outright migration, unless of course you're on the wrong side of it.
Continue to watch the banks; if they break rather than bend --and especially if they give up the level attained yesterday -- that would be cause for pause; the S&P, of it's part, has a good 30 handles before it tests the will of the bulls anew, but there's a lot of room between here and there.
While Russian and Chinese newsflow is relatively light, I remain of the view that we're in the earlier innings of both in terms of potential market catalysts. There seems to be a lot more "there" there as it pertains to Mr. Putin's grand plan. Keep an ear to the ground while remembering that active traders should attempt to filter out big-picture noise.
China and Japan will end the week above their respective technical support levels, so they've got that going for them.
So has Germany, for that matter.
Twitter (NYSE:TWTR) trades funky again. Either a big seller is leaning on the stock or there is distribution for another reason. I don't know, but you can learn a lot just by watching.
GW Pharmaceuticals (NASDAQ:GWPH) is a stock I've been IN-N-OUT of for over a year, and it got a lot of press during its 875% run since last summer. The stock has pulled back 20% since the March high and will test one trend line into $64 and another into $52ish. I will look to revisit the stock, but it's got some time (and price) before I do.
Lots going on so let me get this to you; good luck today, and may peace be with you.
Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter