The stock market put in a reversal day. IBM opened much lower and the stock market sold off on a gap lower then turned and rallied back. Nine of 10 industries in the S&P 500 advanced as traders speculated Federal Reserve Chairman Ben S. Bernanke may tomorrow announce plans to stimulate the economy. Tomorrow or Thursday should be entertaining to say the least.
The DOW’s chart below reflects that reversal closing at the high for the day right at the 50 day MA. It looks like we are in wave C higher.
$VIX: Big down day for the $VIX. As I wrote recently, expect the $vix to go to the bottom trend line if the DOW is going higher. I put in the green line so you know where the parallel channel line might be.
IBM: Big gap down but a rally off the lows. It will be interesting to see how it moves over the next week or two. A rally or consolidation?
JNK: On the move higher. It looks like it’s going to close the gap at the prior higher. Hard to imagine the markets don’t have more upside if this is moving higher.
AAPL: I've highlighted recently my thoughts on the H&S pattern failing. Today the stock rallied ahead of earnings. In after hours, the company reported a 78% increase in earnings. The stock is up almost $8 in after hours. Being skeptical of the pattern was the right call.
So, why did I think that was the case? The total pattern inside the oval looks convoluted, so much, it placed serious doubts the top was in for AAPL. Secondly, I saw a similar H&S top fail in gold several months ago, see gold below.
Gold: I've highlighted the failed H&S pattern on gold, it occurred in a strong up trend like AAPL. Gold has back tested its recent up trend line now resistance.
Watch List: We are back on the long side watch. Today’s pricing structure was not enough downside to go completely bearish. And with the rally at the end of the day, it seems like we have more work higher.
KO: Nice strong move out a consolidation pattern and back test of it’s down trend line. This should be bullish. Next stop should be the 200 day MA and the upper Bollinger Band.
WMT: Nice big gain out of consolidation structure. This too looks bullish. MACD has plenty of room to move higher. The stock has already moved above the first down trend line, which suggests a follow through to the upper down trend line, and the 200 day MA.
BRCM: Still one of the best performing stocks that has been on recent watch lists.
CTSH: This stock had a big gain and moved right up to resistance. Looks like an ascending wedge, just need to break higher. Of the two tech. stocks on the watch list, I prefer this one on a break higher.
SRS: Finally showed a more definitive direction. It looks like wave A down, a 4 day bounce in wave B. We should expect this to test the lows and maybe push a little further if the stock market is moving higher in the wave C up. Absolutely no trade here. The risk is the channel consolidation is a wedge pattern and ABC turns into 12345 down.
GLL: Even though this ETF showed some gains, it never felt like it had legs. I've got no read on it. Today it turned down a little. There’s no trade here. Gold would have to reverse off today's up move.
From My Trading Desk: Today we closed a short on CDE and BA. We also traded in and out of KO and WMT: More on why please see the earlier mid day update: From My Trading Desk.
Towards the end of the day when market strength looked to continue we added a full long trade on WMT. My thought process is too add to longs via KO tomorrow or Thursday. I think KO will at least test its upper Bollinger Band in the very near future.
Note: We are still in No Man's land on the market. It has yet to show any follow though to the down side, nor has it reflected any break out to the upside. This is not the time to carry full positions on everything nor have all your money into the market. Let the market tell us when and where to add, and keep it really simple until market direction reflects better certainty.
Hope all is well.