Markets are relatively quiet today, as the opening half hour of cash-market trading set both the highs and the lows of the session. Today’s big news is that Microsoft CEO Steve Ballmer announced that he will retire “In the next 12 months,” and shockingly, the stock rallied sharply on that news. Not exactly a vote of confidence as to his ability… That spike in MSFT caused futures to rally ahead of the cash session, but that strength has subsided. Stocks are currently trading near the middle of today’s range and slightly higher, led by the Nasdaq, up 0.6% on the session. This is not surprising since MSFT is a major component of that index, and the stock is up nearly 7% at the present time. All other indexes are trading near breakeven for the day. Bonds are catching a strong bid after some weak home sales data, up about 0.8% for the day, while metals are also strong as a result of that news. Gold is up 1.6%, silver is 3.4% higher, and miners are up nearly 3%.
CHART OF THE DAY
General Motors (GM) – The auto maker has been strong this year, up by about 25% since January. The shares recently made new 52-week highs near 38 and have since pulled back, offering a nice entry. GM has been ushered higher by its 80-day moving average for most of the year, and this trendline could act as support going forward. Despite its strength, skeptics toward GM remain. Currently, nearly 10% of the stock’s float is sold short. Should GM continue to move higher, this opens the possibility for short-covering rallies going forward.
I like a long entry here with a stop on a close below 34. I would initially target a move to 38, with 40 as a stretch target.
WHAT I’M EXPECTING
I continue to look for bounces to sell into, but the recent glut of bearish sentiment creates the potential for a bear trap going forward. After only a 4% decline from the highs, sentiment polls showed record increases in bearishness. For this reason, there remains the potential for a strong squeeze should some important technical levels be taken out(namely, 1660 and 1675 on the SPX) or some new market catalyst creep in. I will continue to respect the recent downtrend until we can break above those areas, but be ready for a swift move higher if that were to come to fruition.