Tuesday, December 04, 2012

Stalling At Resistance

Some of the major indexes ran into their overhead 50-day averages yesterday and were turned away.  The S&P 500 reversed lower and basically closed at its lows for the day.  That made for an outside reversal day to the downside, which often indicates some further near-term weakness.

Overnight, Asian markets were mostly lower.  The Reserve Bank of Australia lowered its key interest rate 25 basis points to 3.00%.  I'm not sure the RBA would have cut rates again if it thought China has bottomed, but the move did little to boost investor sentiment.  China actually bounced overnight, but is still trading near 4-yr lows.

Europe's markets are slightly higher today.  Sentiment seems to be improving following some progress made on Greek's bond restructuring.  That has also helped lift the euro higher vs. the dollar.

Despite the dollar weakness today, most commodities are lower.  Gold prices have fallen back to the $1700 level and are trying to stabilize.  Oil prices are lower near $88.  But copper prices are higher so far.

In earnings news, DRI is lower after reporting earnings and lowering guidance.  AZO and MTN are also lower on earnings, while TOL is bouncing after beating on revenues.

The 10-year yield is slightly lower to 1.60%.  This level or zone has pretty much acted as a floor for the 10-yr yield for the last 4 months. 

The volatility index (VIX) is breaking above its 50-day average to the 16.90 level.  We got close to the 20 level in October, but haven't actually seen a 20-handle on the VIX since July.  It would be a little uncharacteristic to see the VIX spike that much in December, which is not the highest of volatility months, but that doesn't mean it couldn't happen.

Trading comment: Lots of tests of overhead resistance.  I mentioned the SPX in the opening paragraph.  But the Nasdaq 100 also bounced from its overhead 50-day and is already back below its 200-day average, as they were pretty close together.  Another stock struggling with resistance is AAPL, which has been hovering near the underside of its 200-day average for the last week.  But yesterday it failed to get above the 200-day (near 596) and today is moving lower again.  AAPL isn't the market leader it was earlier in the year, but if it does regain its footing it would help improve investor sentiment seeing as it is still a very heavily owned stock and a favorite of investors.

KAM Advisors has long positions in AAPL


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