Today is a record-breaking day in the market, as the Dow Industrials have broken to new all-time highs. The strength is not contained to that index alone, as strength lies throughout equity markets. We’re being led higher by technology today, as the Nasdaq is up by about 1.4%. All other major indexes are up near 1% for the session. Despite the extreme move in stocks, bonds continue to hold their bid, down a mere 0.3% today. One bit of surprising action can be seen in metals, as gold and silver are both up modestly despite the strength in equities and weakness in crude. As of late, stocks and metals have traded in an inverse fashion, so the move in tandem is noteworthy.
CHART OF THE DAY
AOL, Inc. (AOL) – AOL is a stock that I’ve recommended here in the past, but is setting up very nicely here again. The shares recently rallied sharply on earnings, and consolidated back near their 20-day moving average. Today, they are breaking out of this bull flag pattern, and the stock looks to move higher from here.
Despite strength in the name, sentiment toward the equity remains skeptical. Currently, nearly 17% of the equity’s float is sold short. Continued strength could cause capitulation by these bears, driving AOL higher. Additionally, analysts have yet to acknowledge the massive rally, as 6 of the 11 analysts covering AOL have it rated a “hold” or worse. This opens the possibility for future upgrades, which could act as a tailwind toward the shares. I like an entry here with a stop on a close below 36.50. I would initially target a move to 40, with 44 being a stretch target.
WHAT I’M EXPECTING
Given how stretched markets are in the short term, I’m looking for one last push to 1550 on the SPX and some resistance at that level. Once there, it should consolidate between 1525 and 1550 before showing its hand as to the next move.