“We could have a short-covering rally into the close so buckle-up”.
Those were our famous last words from Tuesday’s tidbits…
We said yesterday we had high expectations for the week and we were disappointed with the start but the bulls got back on track following Monday’s spanking. The open on Tuesday didn’t look promising as the bears easily penetrated our first wave of downside targets. However, as we were watching support, the charts, and the VIX, we had a good feeling the bulls would hold down the fort so we added a couple of new positions.
Although we wouldn’t considering Tuesday’s pop a “breakout”, the price action is still higher despite those who want to short this market. We haven’t heard any “uncle’s”, yet, but the bears were close to saying it as their knuckles turned redder into the close.
The Dow surged 180 points, or 1.6%, to close at 11,577. After touching a low of 11,296, the blue-chips turned on a dime and traded to a high of 11,652 into the close. If the index can close above 11,600, it should clear the way for a quick run to 11,800 while 11,350 remains short-term support.
The S&P 500 added 25 points, or 2%, to settle at 1,225. The index briefly dipped below the 1,200 level and kissed 1,191 before rebounding to a high of 1,233. The S&P closed right on our first upside target and the move above 1,225 intraday suggests the bulls are still eyeing 1,250-1,275 over the near-term. Support remains at 1,200-1,190 with 1,175 providing backup.
The Nasdaq jumped 43 points, or 1.6%, to end at 2,657. Tech easily held the 2,600 level after touching a low of 2,586 while the high was 2,667. Resistance is at 2,675-2,700 while short-term support remains 2,600-2,575.
The S&P Volatility Index (VIX, 31.56. down 1.83) traded to a high of 34.71 and came into the week at 28. We mentioned in our Weekly Wrap the bulls would be trying to keep the VIX below 30 as we see the low 20’s coming into play on a continued rally. However, volatility hasn’t gone away and what normally takes weeks for something to play out is now only taking days.
Of course, all of this is yesterday news and the bulls have a fresh set of challenges ahead of themselves today. After the closing bell last night, Apple (AAPL, $422.24, up $2.25) shocked Wall Street with a rare earnings miss. However, Intel (INTC, $23.40, up $0.12) announced another outstanding quarter while Yahoo (YHOO, $15.47, down $0.23) and Juniper Networks (JNPR, $21.41, up $1.01) also beat expectations.
We will have more on these stories in our afternoon update.
Futures are mixed and pointing towards a slightly lower open as Apple is heavily weighted in some of the major indexes. Dow futures are up 2 points to 11,528 while S&P 500 futures are lower by 2 points to 1,221. Nasdaq futures are off 14 points to 2,350.