Another Head-Fake

End of Day Update:

It was another head-fake for the S&P500. Early weakness pushed us down to 2,100 support, a midday rebound challenged 2,120 resistance, but ultimately we finished smack-dab in the middle of the range…again. Option sellers love this mind-numbing trade, but they are the only ones. Buying strength or selling weakness has been a path to financial ruin as every move reverses hours later.

I am encouraged by the continued support at 2,100, but just as concerned by the inability to clear 2,120. Half the market refuses to sell at a discount while the other half refuses to pay a premium. This is nothing more than a battle of wills and whichever side proves more stubborn will ultimately be the victor. While our departure from this overly restrictive trading range is imminent, there is a high probability the first breakout / breakdown will be the most painful head-fake to date. This market brutalizes anyone making directional trades and it isn’t done yet.

Greece is the looming catastrophe everyone is afraid of, but that is exactly why it won’t be a big deal. This will be the market’s Y2K. In the late 90’s there was a real reason to be concerned about computer problems when clocks rolled over to 2000, but that fear drove preparation, and that preparation made it a non-issue. We’ve been talking about a Grexit for so long that most have had enough notice to hedge the risk. And that’s why for the rest of the world, the Grexit will be a non-issue and the market will rally when it finally happens. But until then, the fear of it keeps hanging over us, making it difficult to push to new highs.

Individual Stocks:

$AAPL – Apple is mirroring the S&P500 and there is no change from yesterday’s analysis. Ignore the Developer’s Conference and AAPL will rally or fall along with the broad market.

$EBAY – Ebay finished in the red, but we are still well above the breakout point and this weakness nothing to worry about. The previous three days were up strongly and it shouldn’t surprise anyone to see this cool off as long-term owners get nervous at these new highs and lock-in profits.

$FEYE – Everything I said about EBAY applies equally to FEYE’s price-action today.

$ALGN – Align Technology is another breakout worth keeping an eye on. Similar to EBAY, it is challenging multi-year resistance near $60. The Great Recession is quickly fading from memory and many consumers are finally warming up to big-ticket purchases again. Premium teeth straightening systems fall into that category and the stock is challenging the highs as customers who previously lacked job security are finally making those deferred purchases and others are opting for ALGN’s more expensive products. It would be reassuring to see volume pick up in coming day, but as long as the stock holds above $58, the breakout is in good shape.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN