“Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” - John Templeton
Last week the U. S. market has had seesawed sessions as expected. By Friday, all major indexes closed in fairly strong note. SPX closed at 1,556.89, only 6+ points from its year high of 1563, and 20 points from its 2007 high of 1576.
The strong finish was well helped by the month/quarter-end window dressing. We saw rotation into some beaten down stocks lately, such as AAPL, VWM, SSYS, and MLNX.
Note: Beaten-down stocks VMW and MLNX both had sharp bounce from their recent lows, and then sold off from the big resistance levels at their 100-day SMA.
AAPL successfully closed above its 50-day SMA, its first time during its past six-month downward move. In my opinion, its next possible upside target would be 100-day SMA near 500-505 as volume should come in.
Conversely, the recent leading stocks have pulled back from their highs seen in GOOG, GS, ISRG, NFLX, KORS, EBAY, etc. , but some of them may see bounce along with market rally. Shorting them at current levels is risky.
The volume on the market upward move has been light recently, and it should pick up in the coming sessions. The volume may pick up until buying exhaustion is seen. Should we see euphoria-like rally before a short-term market top occurs? Let’s watch and see …
Notably, the disappointing earning related news caused bearish price action to LULU, ORCL and FDX. It demonstrates how vulnerable it is during the company earning time, especially when their rally had been extended for a very long time. With only a few weeks away from next earning season starting in April, we should get more per-earning warnings along the way.
It’s always good to be flexible and objective, especially in a choppy market with rotation going on. Remember: have trading plans, enter trades with nice cushion, and cut loss short. Happy trading!