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The markets are seeing red today with the SPDR S&P 500 ETF (NYSEARCA:SPY) trading at $135.86, -0.60 (-0.44%). After Greece received its second bailout over the holiday weekend, the markets have started to show major cracks. Interestingly enough, this is happening just as the retail investor is jumping back into the market. This is setting up for a sell off and pivot top of 2012. Yes, you heard it first here, we are close, if not at the highs of 2012.
The first crack must be recognized by viewing the reaction to the Greek bailout. Any positive news out of Europe since the start of the year has been met with buying. Even negative news has only sent the markets lower early in the day, then higher into the close. This positive reaction has failed in the two days of trading this week. This is a sign of a market top approaching.
Secondly, the Dow Jones Industrial Average tagged the master 13,000 level yesterday. No sooner did it tag that level, then it collapsed back down. The lack of conviction on the buy side to hold the Dow above 13,000 must be noted. In addition, the SPY 2011 high on May 2nd was $137.18. Yesterday, the SPY hit a high of $137.05 and reversed. The fact that the SPY could not even touch the 2011 highs is something to note and signals weakness.
There are other factors as well. Dow Theory is not confirming for one. The transports are not leading along with the Dow Jones Industrial Average. This is problematic for the overall market health. Also, ever since Apple Inc. (NASDAQ:AAPL) topped at $526.29, the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) has not made a new high. Technology has lead this market higher and is now faltering.
As the markets top out, some great short trades start to emerge. The proprietary radar is picking up Caterpillar Inc. (NYSE:CAT) and Mastercard Inc (NYSE:MA) as two stocks that are perfect for a short. Others are available as well. To get these, take the seven day free trial to the Research Center and Intra Day Stock Chat. Join the elite pros as they swing trade the market using proprietary techniques and analysis. Profit with the pros on every market swing, up and down.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
This afternoon, the major stock indexes are trading slightly lower on the trading day. Earlier today, the Dow Jones Industrial Average pierced the psychological 13,000 level. Since that high was made around the noon hour the markets have been slowly declining lower. Despite today’s shallow point decline in the major stock indexes there are still some technical sell offs worth noting.
The iShares Dow Jones Transportation ETF (NYSEARCA:IYT) is trading lower by 1.75 percent. That decline in the highly followed transportation index translates into a decline of 92.00 points in the Dow Jones Transportation Average.
The iShares Dow Jones Transportation ETF (NYSEARCA:IYT) is trading lower by 1.75 percent. That decline in the highly followed transportation index translates into a decline of 92.00 points in the Dow Jones Transportation Average.
Almost every seasoned trader follows the semiconductors stocks very closely. This afternoon, the leading semiconductor equipment makers are dropping sharply lower. KLA-Tencor Corp (NASDAQ:KLAC) is trading lower by $2.00 to $48.16 a share. Lam Research Corp (NASDAQ:LRCX) is another leading semiconductor equipment maker that is dropping by $1.63 to $40.35 a share. It is important to note that these stocks were market leaders in early February.
High oil and energy prices are also a major problem for these markets. How can the average person afford $4.00 gasoline. All traders know that it was high oil and energy prices that broke the stock market and the economy in 2008.
The leading Chinese ADR's are all trading lower today despite the Chinese easing their bank reserve requirements. Leading Chinese ADR's such as Baidu Inc (NASDAQ:BIDU), Sohu.com Inc (NASDAQ:SOHU), and Sina Corp (NASDAQ:SINA) have been under selling pressure for most of the day. If the Chinese economy begins to decline again this stock market rally; that started in December 2011, could be in jeopardy.
Another factor that is telling us this market could be facing headwinds soon is simply that the markets are trading lower into the close. Since December 19, 2011, the major stock indexes have usually rallied after the lunch hour. This late day decline is a small change in character from what we have been accustomed to seeing.
Greece secured a second round of financing from the Eurozone but unfortunately this highly anticipated development failed to lift the euro. The problem is that doubts linger about the country’s ability to meet its debt obligations and default
This morning, the precious metals are trading sharply higher. The catalyst for the advance in gold, and silver is the weaker U.S. Dollar Index, and the pledge by central banks to keep easy money available. Last night, the People Bank of China (Chinese central bank) cut reserve requirements for lenders. This is just another example of easy credit. All of these similar actions by the central banks around the world are inflationary and that is exactly what gold and most other precious metals are saying to us today.
This morning, the SPDR Gold Shares (NYSEARCA:GLD) is trading higher by $3.25 to $170.60 a share. Other precious metal ETF's that are trading higher today include ProShares Ultra Silver ETF (NYSEARCA:AGQ), Central Fund of Canada Limited (NYSEAMEX:CEF), and the iShares Gold Trust ETF (NYSEARCA:IAU). Traders and investors should continue to follow the U.S. Dollar Index as a weaker dollar will usually inflate these equities higher.
The markets are floating higher today after an agreement was reached on a second Greek bailout. This market float is the same light volume we have seen for almost two months now, no change based on the European news. Based on the market reaction, the bailout was fully expected and priced in. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $136.80, +0.39 (+0.29%).
After options expiration ended on Friday, Apple Inc. (NASDAQ:AAPL) found itself near the $500.00 level. Always remember, institutions push key stocks to major levels like $500 on AAPL on options expiration. The reason for this? Institutions know that a major level will have the largest amount of options at that strike, both puts and calls. Institutions make the most money when a stock closes at its strike as neither puts nor calls pay off. The institutions walk away with the premium as pure profit. After options expiration, Apple is jumping, trading at $512.36, +10.24 (+2.04%).
The Dow Jones Industrial Average is striving to capture the 13,000 level. As of now it is just 20 points away. It is also worth to note that the technology sector is no longer leading the market. While the S&P 500 and Dow Jones Industrial Average are making new highs, the NASDAQ 100 has been stuck below the high from last Wednesday.
All in all, it is business as usual with this market. Light volume continues to propel the market slightly higher each and every day. Take get master swing trades, proprietary guidance and amazing analysis, take the seven day free trial to the Research Center and Intra Day Stock Chat. Join the elite pros as they profit on every move up and down in the market.
Related: SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) and PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ).
Gareth Soloway
Chief Market Strategist
