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Stocks Like AAPL and JPM May Hold the Keys to the Market

Market is unlikely to power higher without participation of high-beta stocks


Editor’s note: Serge Berger, the head trader and investment strategist for The Steady Trader, will be providing the Daily Market Outlook until Sam Collins returns on June 27.

Broadly speaking, yesterday could be summarized as a consolidation day in the major U.S. equity indices. Stocks couldn’t hold on to earlier gains and began selling off shortly after Bernanke started his press conference. The Federal Reserve lowered its economic forecast yesterday, which did not encourage bulls to buy stocks.

In yesterday’s Daily Market Outlook, I showed this chart of the Russell 2000 and pointed out the resistance area around 810. That level was tested intraday yesterday, but ultimately failed, and the RUT left a fairly ugly long-tailed candle.

Russell 2000 Chart

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On the S&P 500, the 1,300 area serves as important mental resistance — round numbers tend to act as magnets and/or rejection areas. We are now fully back to the April lows, which should act as some sort of resistance, so it is not surprising that yesterday’s intraday high was 1,298.6.

SPX Chart

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Individual key stocks such as Apple (NASDAQ: AAPL) and JPMorgan Chase (NYSE: JPM) left pretty long tails on yesterday’s candles. On the chart below, note that JPM tried to break the downtrend that has been in place since early May, but failed and left a long-tailed doji.

JPM Chart

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Gold also tried to rally, but closed fairly flat for the day. I think gold has a good chance of rallying soon, but the fact that it stalled yesterday just shows the overall indecision in yesterday’s trade. (The semiconductors chart of the PHLX Semiconductor Index (SOX) that I discussed yesterday also ended with an indecision day.)

GLD Close-up Chart

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Another interesting data point here is that the 10-year U.S. Treasury notes futures contract has now retraced 61.8% of the move down from recent highs in November 2010. On the Fibonacci studies, 61.8% is an important retracement level and often serves as resistance/support. I’m pointing this out because if the hint of positive price action in equities over the past several days is to be the beginning of something bigger, then bonds may indeed become better offered.

10-Year Treasury Chart

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Overall, not much changed yesterday. Stocks still need more power to get through the immediate resistance areas, and that is unlikely to happen unless the important beta stocks and key indices participate to the upside.

For one sector ETF I do think will power higher, see the Trade of the Day.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.

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