Prior to this morning’s open, futures rallied sharply into the weekly jobless claims number. It seems that this was smart money, in that the data we received at 8:30 was very favorable — jobless claims of 335,000 versus a consensus estimate of 370,000. As you would expect, futures continued to rally, and markets opened strongly. Since then, we’ve seen more buying, as the S&P 500 is currently at the highs of the day. These highs also represent new five-year highs on the index. The Russell 2000 is leading markets higher, currently up 1.1%, while the Nasdaq is the relative laggard, up 0.8%. Risk appears to be “on” across the complex, as bonds are selling off sharply, currently down about 1.2%, with metals up about 1%.
CHART OF THE DAY
Avis Budget Group (CAR) – The rental car concern has been strong lately, up about 7% so far this year and nearly 70% over the past 52 weeks. Despite its strength, short interest remains elevated at 12% of the company’s float. In fact, based upon recent volume trends, it would take over 9 days to unwind current outstanding short interest. Should CAR continue to trek higher, some short covering could be expected, which would act as a tailwind.
The recent low-volume pullback offers a nice long entry. I’d key off the 2o-day moving average(currently 20.71) as a guide for position management. An entry here with a target of 24(the highs from October 2007), and a stop with a close below the 20-day moving average makes sense. CAR is slated to report quarterly earnings on 2/13, so be sure to manage risk into that event.
WHAT I’M EXPECTING
The old market mantra “The trend is your friend” seems to come to mind. As a trader, you’re in the business of making money, not being right. Calling tops is a fools game, so continue to ride this wave higher until it stalls. That said, you now have well-defined levels to trade against and manage risk. The 1474 highs on the S&P 500 that we just broke through should now act as support, so new longs can target that area for a bailout point. Above here, 1500 appears to be the next stop.