Markets are higher yet again, as last week’s tapering fears from the Fed seem to have subsided for the time being. Equity futures began their ramp higher at about 4 am, and opened near yesterday’s high print. From there, buyers stepped in on the cash open and pushed the S&P 500 up to 1620, near its 20-day moving average. The first test of that trendline was a failure, however, as bears sold the rally near lunchtime. From there, we’ve bounced around near the lows of the session, but are still significantly higher from yesterday’s close. At present levels, the Russell 2000 is leading equities higher, up about 1.4% for the day, while the Nasdaq is again lagging, and higher by only 0.6%. The Dow and S&P 500 are both higher by about 0.7%. Bonds are catching a bid today, as the 10-year yield has broken back below the key 2.5% level. Currently, bonds are about 0.5% higher for the session, while metals are getting hit yet again. Gold is lower by nearly 2%, while silver is off 0.4%.
CHART OF THE DAY
Krispy Kreme Doughnuts (KKD) – The doughnut company has been on a tear this year, up nearly 90% since January. The shares recently ripped higher on blowout earnings and guidance, and have since consolidated near the 17.50 level, the current site of the 20-day moving average. This pullback has worked off the overbought conditions, and offers a nice entry from the long side.
I like buying KKD here with a stop on a close below 16.50. I would initially target a move to 20, with 25 as a stretch target.
WHAT I’M EXPECTING
Given that we came very close to my 1625 upside target for the S&P 500 on today’s rally, I don’t have much edge on direction for the time being. In my opinion, the pain trade remains higher, but bulls have some very significant technical hurdles to overcome in order to extend this recent bounce. The levels of interest are now very obvious(1600 support/1620 resistance), and this should be a treated as a range until one side is broken. More is less until we get further clarity. Tomorrow should prove very interesting, as it’s the end of the second quarter and there is a rebalance in the Russell 2000. This can often times lead to crazy trading, especially in the last hour of the day.