Stocks were weak off the opening move higher today, but that early selling has been reversed. The S&P 500 is currently near its highs of the day, but once again the Russell 2000 remains the strongest index in the market. At present levels, the S&P and Dow are both trading near breakeven, but the Russell is 0.7% higher and the Nasdaq is 0.5% higher, largely a result of blowout earnings from FB last night. Bonds are slightly lower today, as the 10-year yield has crept back above 2.6%, and metals are modestly higher.
CHART OF THE DAY
Trina Solar (TSL) – The small-cap solar concern continues to outperform the broad market, higher by about 70% since the beginning of the year. The shares recently made a new 52-week closing high and have since consolidated near the 7 level, site of former resistance. Despite its strength, short interest remains very elevated, at over 20% of TSL’s float. This creates the potential for short-covering rallies, which could drive the equity higher.
I like a long entry here with a stop on a close below 7. I would initially target a move to 8, with 10 as a stretch target.
WHAT I’M EXPECTING
Despite today’s move off the lows, I’m still looking for more of a pullback in the S&P 500 before we see new highs. However, there is some event risk for bears, since there is a Fed meeting next week and also the end of the month, where markets can sometime see markups into the end of the calendar page. One thing that has peaked my interest is that markets were very weak on the open today despite blowout earnings across the board last night. This could be a sign of near-term exhaustion. Going forward, I will continue to try and short bounces until we can take out the key 1700 level on the S&P 500.