Thursday’s close marked the first positive day for the SPX in the month of June, with one caveat though, on relatively low volume….The index is down almost 6% from it’s May 2nd high and culminating in 6 consecutive losing weeks, the longest stretch since 2002….. yesterday’s rally was interesting to me because it was relatively broad based, with leadership coming from financial stocks, which have been one of the worst performing groups. The positive price action was also confirmed in the options market with 3 large bullish trades going up in BAC, WFC and JPM (read here).
Tech was kind of mixed with AAPL having a hard time getting going and the SOX under-performing most sub-sectors in the space.
Agriculture stocks were particularly strong with MOS up almost 5% and POT up 4% which may be of interest because of their perceived link to the global growth story….
Today is an important day in mind, with S&P futures down 3 pre-opening to 1279.10, a failure below Wednesday’s intra-day low of 1277.50 would be particularly bearish. The next real support, in my mind, is ~1252 in the SPX, which is also the 200 day moving average and my near term price target. But I am not expecting too many fireworks today as it is likely to be a relatively low volume on a summer Friday. My guess would be a lower close as most traders will be focused on negative developments out of Europe and the impending deluge of negative commentary in the financial press over the weekend….there will be calls for QE3, which may scare the shorts but seems very unlikely for the time being. Things would have to get much worse, or the markets would have to tell the Fed with a severe correction.
I am watching for the Banks to continue their strength, if they reverse yesterday’s gains and make new lows then watch out below….I am also keeping an eye on names like AAPL that had underperformed the broad market in the weeks prior to the sell off and are now holding firm. If widely owned names like this were to break (and it appears close) then I see levels in the SPX below 1250 in the coming weeks.