After some weak action on Wednesday, market players were poorly positioned for a sudden spike up this morning. Positive economic news out of Europe and some strong earnings reports from the likes of FFIV, UPS and CAT caused sentiment to flip and a mad scramble to cover shorts and find some long exposure.
The action today is a particularly good example of why the biggest moves tend to occur in bear markets and downtrends. Market players aren't ready for them, meaning they have to chase the move if they want in. That also explains why we don't see sharp reversals once we have a strong start to the day. There is suddenly a big supply of buyers anxious to buy a dip, and that prevents intraday turns.
We did have some slight selling in the final hour as nervous holders took some profits. In view of how this market has been flip-flopping lately, I have to wonder about the likelihood we'll gap down to start tomorrow.
Earnings reports are rolling in as I write. DECK, CMG and AXP look solid but SNDK and AMZN are getting thumped. It looks like Amazon is weak due to exchange rates, which is the same thing that hurt IBM. AMZN is being absolutely pounded, which is not a good sign at all. MSFT just hit and is a little better than expected but is trading down a little. AMZN is going to give the bears some hope here, but the bulls did gains some momentum today.
Obviously there is a lot of news out there to digest, but I think the bulls will make a strong run at the resistance at 1100 in the S&P 500 in the near term. The really big hurdle after that is the 200-day simple moving average around 1113. I believe the bears will make a stand there, and with the most important earnings reports out of the way, it will be tougher to find more positive catalysts.
The inconsistency in this market from day to day makes trading quite tricky, and AMZN is doing its best to reverse us once again. There should also be some news about European bank stress tests overnight, so be ready for anything in the morning.