The S&P 500 made a new all-time high today on an intraday basis, as this recent rally “post-taper” fears isn’t showing any signs of stopping in the near future. The catalyst to propel stocks to new highs today was the Philly Fed Index report at 10 AM, which blew out its low expectations. The S&P 500 made an intraday high of 1693 at around 11 AM, and has since pulled back slightly. However, the index remains higher by about 0.5% on the day, and above its previous all-time highs made in May. Other indexes are seeing some levitation as well, with the Russell 2000 once again leading, higher by 0.7% for the session. Today’s laggard is the Nasdaq, as a few large-cap tech names are weak and dragging it down. At current levels, the index is off by about 0.3%. Bonds are getting hit amid the equity strength, down about 1%, while metals and miners are slightly higher.
CHART OF THE DAY
Joy Global (JOY) – Materials companies have been very weak this year, and JOY is no exception, as the equity is lower by about 15% since the beginning of the year. The shares recently bounced off the 48 level but stalled at their 50-day moving average, a trendline that has capped it for most of the year. This could be indicative of resistance going forward. Despite its weakness, sentiment toward JOY remains very bullish. In fact, calls are outpacing puts at nearly a 3:2 clip in the front three months’ option open interest. This weak price action amid bullish sentiment offers a nice contrarian bearish setup.
I like a bearish entry here with a stop on a close above 52.50. I would initially target a move back to 48, with 44 as a stretch target.
WHAT I’M EXPECTING
A continued push toward 1700 on the S&P 500. While the road there may not be uniform and easy, I do believe that a test of that level could prove significant. Markets are very overbought at current levels, but there aren’t any reasons to get in front of the bull train here and now. Seemingly every data point that has been released lately, whether good or bad, has led to a rally. For this reason, keep your stops tight on counter-trend plays and ride your winners.