For the second day in a row the major indices appeared ready to break out of their current trading ranges. But late day speculation that troubled bond insurer ABK would receive much needed capital to stay afloat helped the market regain most of their early day losses. This, of course, helped the financials from breaking to new 52 week lows. The XLF climbed back above the $25 level support, and many individual individual names saw late day buying to to prevent major declines.
If ABK news didn’t reach the market before the closing bell, names like MS ,CIT and others may have broken down to new lows.
We may see additional buying in these names over the ext few days. I believe a mini rally in the financials may take place because we saw some rotation out the the commodity related stocks and the commodities themselves. The performance in the USO, GLD and other metals has been fantastic of late. But they all suffered large losses today on very large volume. The GLD traded the most shares in over 6 weeks today. There is still a lot of room for the commodities (and the related stocks) to fall while still remaining in long term up trends. So don’t be surprised to see names like FCX, MON, AUY and SWN come back to earth.
The NDX was the best performing index today as executives from AMZN and CSCO provided bullish commentary regarding the future prospects of their respective companies. Also, take a look at INTC.
INTC started off trading deep into the red as the company lowered it profit margins on the upcoming quarter. Yet, for some reason, stocks can shake off bad news when the S&P 500 is trading near the 1325 support level. But when we reach the 1375 level, bad news crushes the market and most stocks (like last Friday’s 300 point drop in the DOW). Speaking of trading ranges, the semis also can’t trade beyond the 340 to 380 on the SOX.
Until we see the major indices end a session (and that’s the key; the S&P 500 has cracked the 1325 level, but we haven’t closed below this number) below the 1325 on strong volume, we will likely continue to trade in the current range.
