Good morning traders,
The S&P 500 is still dealing with important resistance, which is not a clear level but a rough zone from 122 – 123.60 on the SPY. Though we are above that this morning, this is a large zone and we cannot expect a clean break. The Russell 2000 index (see IWM) is still potentially overextended and vulnerable to a larger pullback, which certainly could drop the SPY below support. Swing traders still have no real reason for concern, and could actually use this pullback as a spot to add to long positions, but shorter-term daytraders can expect choppy trading as the market works off this overbought condition.
There is no clear setup for either the upside or downside today. Though the reaction to the 8:30 jobs number has been positive, this bounce has just brought the market higher in the consolidation area and is not challenging any major resistance. You do not want to get caught shorting weakness or buying strength on the first push out of this consolidation area. A far better play is to wait for the market to hold either higher or lower and then try to position yourself in the correct direction. You don’t have to catch the first move–better to sacrifice trade location (price) for confirmation in this case.
The bottom line is that we are likely to have a string of days, while the market is in higher timeframe consolidation, that do not favor holding stocks for extended trend plays unless you can identify truly in-play stocks early in the day. Some of the traders on our desk (and my Twitter stream apparently, based on the messages I received) made good plays in stocks like IVN and LNC. I have been Tweeting the SMB Radar’s most in-play list around 9:45 every morning. I will do that again today, so follow me on Twitter to get this list (AdamG_SMB).
Gold and Silver futures attempted to bounce a bit overnight, but have turned back down and may be set to challenge session lows early this morning. I think it is appropriate to hold a short-term bearish bias in precious metals (less so in Copper), but be extremely flexible with this. Do not get stubborn with this bias!
We are watching some Energy, Basic Materials and Financial stocks to possibly be in play today.
