..Gap filler

We knew last week that market was potentially set up to retrace.   Toward the end of the last week, market nearly wiped most of the gains it took on from Monday.  Heading into today, we said stop no monkeying around,  let’s just test that Monday hourly gap 1113-1122 for support.   By mid-day today, the market did that just in a quick swoon from low SPX1020's to ~1114.    At that low point,  it pretty much wiped out all of the gains from the trillion dollar rescue pop!.    Well,  it did turn out to be the low and than market had an impressive reversal toward the end of the session to close positive, despite a slew of negative headlines to hit the tape in the morning.   Still, it was very quiet on the Sovereign crisis over the weekend and Europe did have a green day,  so we really didn’t need to be down as much as we were because Europe was not in focus!.    Let`s hope this quietness remains.   But, like it's EYJAFJALLAJOKULL neighbour,  you never know when it will erupt again and disrupt things.   Life needs to go on and sovereign issues need to get priced in and that is what the market is doing in this correction.  Once Euro banks trade positively, CD spreads stabilize and bond issuance continue to go out successfully, things will stabilize.

From the look of it, we may have a range trading coming up between today's low and last week's high.   This is a pretty wide range and we`ll have some good trading setups between these wide levels because it`s so wide.   The filling of gap and follow through let in for some dipping of the toes back into the market and hopefully some more up draft within the week.   It's really encouraging to see this market to start the week the way it did today as we finally saw signs of  'dip buying'.    However, regardless how much this market reversed from the low today, we are not out of danger yet and we'll need to see some 'chase' follow through tomorrow.   Keep in mind,  it's possible that this market retests today's low again and/or give 1100 a run for the money. 

Just like in the past few sessions, commodity sectors have been leading the loser list.    We all know that USD has been going up steadily and along with China, these are the two main powerful factors that are keeping tons of pressure on the commodity.  Today, it was the weaker Euro crimping China exports hitting the tape.   For anyone still riding commodity names,  it hasn't been easy seeing how quickly they get dumped (see copper break 200ma and Oil break of $70 are signals for global growth),  The good thing is, this is the group always leads the decline and will be the group that will lead later and so these need to rebound first.     Right now,  China has to find support both in their market and in their state policies in order to halt the fear among the investors.   USD-Euro, on the other hand, has to find a range for people to accept for the next while.   Until then, we may have a chance for the commods to move in the same direction until copper, oil and other commidites rebound.     For us at DJIM,   we'd stick to plays that have none of the Europe/ China exposure and those that are enjoying the US Economic recovery.   Plays like AAPL,CRM,FFIV, CSTR, VCI, CREE, APKT, NFLX, MFB... are among those that are high on our trading list.  You really have to do some research in the weeks ahead to be in this rotation that may last a long time.  In fact,  if a play that's still within 10% or so of the recent high, chances are, it fits in this description.

Tomorrow we have HD and WMT reporting and those two can be the heavy catalysts that can give this market a further boost to the upside. (LOW `s didn`t help today).   Right now, the consensus seems to be "count on the US Economy"!    Bottom line,  it's very important to review your plays to see where their business are exposed.