PM: Moving past 1500

By Jani Ziedins | Intraday Analysis

Jan 29
S&P500 daily at end of day

S&P500 daily at end of day

PM Update

The S&P500 set another new high and is poised to continue.  AAPL flirted with $460, but was unable to break above.  Another couple of days of sideways trade will make a sharp rebound unlikely.

MARKET BEHAVIOR

The S&P500 set another new high in above average volume.  The more people wait for the pullback, the higher this thing goes.  Every market tops, but they usually go further and longer than most expect and that is clearly the case here.

MARKET SENTIMENT

Virtually everyone holding a diversified basket of stocks is showing a profit with the market at 5-year highs.  When things are going this well, there is very little selling pressure as holders keep holding on for more.  Eventually this ride will come to an end, but we are not there yet.  As long as there are regretful investors watching this market rally without them, there will be fuel to keep pushing us higher.

The market held 1500 for a couple of days and today’s break above 1504 confirmed the continuation.  The breakout was a modest 0.5% and relatively contained.  We need to watch for an unsustainable surge higher, but that will be a move well in excess of 1% and far higher volume than today’s 17% above average.

TRADING OPPORTUNITIES

Expected Outcome:
Yesterday’s dip was all the market needed to refresh itself and while we are getting further and further extended, this market still has legs.  We might only see another 20 or 40 points of upside, so jumping in here is clearly late to the party, but there is enough upside left that shorting this market is not advisable.

Alternate Outcome:
Today’s pop could be the false breakout that dragged in the last of the buyers, but it sure didn’t have a capitulation feel.  As always, the market can get spooked by its own shadow and nose over without warning, but the market is in a rallying mood and ignoring negative headlines.

AAPL daily at end of day

AAPL daily at end of day

INDIVIDUAL STOCKS

AAPL rallied modestly on light volume.  It tried to recover $460, but it could not break thought this level.  The encouraging thing for AAPL is the light volume shows sellers are taking a break for the time being.  Maybe hopeful holders are holding a little longer as the expected rebound is about to take place.  V-bottoms happen over a couple of days and if AAPL continues trading sideways at these levels, that greatly diminishes the probability of a sharp rebound.  If AAPL doesn’t trade sharply higher tomorrow, look for either a rounded base or more selling.

Apple released an upgraded iPad without much fanfare.  The one takeaway is they would not have done this if a completely redesigned iPad release was imminent, so one potential catalyst can be eliminated.  The interesting thing about Apple dropping the numbering convention on the iPad means future upgrades will most likely revolve around memory and processor upgrades.  Design-wise it is really hard to do much with a thin, rectangular piece of glass.  The headwind AAPL will continue facing is the existing iPad and iPhone products are so good that few people see the value in upgrading for fairly incremental improvements in newer models.

Stay safe

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About the Author

Jani Ziedins (pronounced Ya-nee) is a full-time investor and writer who has successfully traded stocks and options for more than a decade. He earned a B.S. in Mechanical Engineering from the Colorado School of Mines and an MBA and M.S. Marketing from the University of Colorado Denver. His prior professional experience includes manufacturing engineering at Fortune 500 companies, structural engineering, small business consultant, collegiate instructor, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two young children.

Jon January 29, 2013

Thanks as always for the daily posts! Continues to inform.

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