PM: 1500 is rock solid

PM Update

Bears cannot break this rally and look for higher prices in coming days.  AAPL surged on hopes of money being distributed to shareholders, but use this strength to get out.  AMZN looks interesting here and NFLX is chewing up bulls and bears alike.

MARKET BEHAVIOR

Stocks stumbled in early trade but recovered most of those losses by the close.  The market is finding support near 1500 and continues bouncing back from any dips to this key level.

MARKET SENTIMENT

No matter what the “experts” say, this market does not want to selloff.  For the umpteenth time it had the perfect opportunity to selloff, yet found support and rebounded.  If this market was as over-bought and overly-bullish as many are claiming, it would have fallen apart at the first signs of weakness.  Clearly that is not happening.  This market will top because every market tops, but it isn’t ready yet.  Look for the cynics to turn into chasers the higher this market goes.  Since many of these cynics are big money managers, there is still a lot of fuel left in the tank.

TRADING OPPORTUNITIES

Expected Outcome:
The reluctance to selloff after so many tempting opportunities shows this market is far more resilient than most give it credit for.  I can’t say how much higher this will go, but high-probability trade remains to the upside.  Today’s rebound made for a nice entry point and if you missed that, look to buy any dips.  We have probably seen the last 1500 dip and look for the market to surge past 1515 as shorts scramble to cover on Friday.  The next target is 1525 and depending on how the market trades there, 1550 is a real possibility in coming weeks.

Alternate Outcome:
With so many failed breakdowns it is hard to see the market implode, but we still need to prepare for the unexpected.  A material break of 1500 that doesn’t find support and bounce is a change in character and we will need to reevaluate our bullish thesis.

INDIVIDUAL STOCKS

AAPL spiked in anticipation of a policy shift regarding its cash hoard.  Clearly investors favor getting their hands on some of that money, but this is not a fundamental shift in the business model and the enthusiasm will be short-lived.  The primary reason for AAPL’s selloff has been concern over competitiveness and margins.  Increasing dividends, buybacks, or preferred stock plans does nothing to help the company make more money.  Everyone has long assumed AAPL would do something with that mountain of cash, so most of this is already baked into the price.  This is still a trading stock and a move up to $485 should be used as a selling opportunity.  The best trade for the next few months is selling strength and buying weakness.  Give this story a few days to play out, but don’t get sucked up into the hype.

NFLX pulled back modestly after making a new high. This stock is chewing up momentum chasers and shorts at the same time, so be careful with this one.  The trend is higher and $200 is within easy reach, but it might experience a few dramatic dips along the way.

AMZN slipped under the 50dma, but quickly recovered this level.  Finding buyers and not triggering a larger avalanche of selling is suggestive of a move higher.  If the broad market breaks out to new highs, look for it to take AMZN with it.

Stay safe