The market got off to a good start for the week, as the major indices made a run to the top of their trading ranges on Monday. Although the bulls failed to hold near-term resistance zones, the action kept the possibility for continued all-time highs into May alive.
The Dow added 46 points, or 0.3%, to settle at 18,070. The blue-chips traded in positive territory for the second-straight session and reached a peak of 18,133. The bulls failed at holding resistance at 18,100–18,200, which are levels that have stuck since early April.
The S&P 500 gained 6 points, or 0.3%, to close at 2,114. The index tested resistance at 2,115–2,125 on the open after trading to a high of 2,120, but it failed to clear the top of its trading range. A close above 2,125 keeps 2,150–2,175 in play. Support is at 2,100–2,090 and the 50-day moving average.
The Nasdaq climbed 11 points, or 0.2%, to finish at 5,016. Tech opened just below 5,025 at 5,018 and made a run to resistance at 5,050–5,100. The index fell short of pushing this zone after stalling at 5,043, but the effort looked good.
Meanwhile, the Russell 2000 advanced 5 points, or 0.4%, to end at 1,233. The small-caps opened at 1,230 and tested resistance at 1,240–1,250 and the 50-day moving average but failed at holding their resistance level into the close.
I often say that calling a market top is never easy, which is why so many knuckleheads have been wrong over the past few years as they try to do so. The market has traded higher in May over the past two years, and there is still wiggle room or “fluff” to higher highs. Don’t nervous (or bearish) until the bears saw a leg off of the bar stool.
There are plenty of clues that will let us know when a possible market top is in or when the action will get wobbly. In the meantime, I will continue to play the three-month trading range.
The financial stocks are holding up well, and there are a few names I like in the sector. Bank of America Corp (BAC) cleared its 200-day moving average on Monday, but let’s go with Wells Fargo & Co (WFC) because it tends to make larger price moves.
Buy the WFC June 57.50 calls (WFC150619C00057500) at current levels, around $0.35, for target $0.65. These are the regular monthly calls that expire on June 19.
The 52-week high is at $56.26, and Wells Fargo shares are holding their 50-day moving average. Support is at $55–$54.75. A close above $55.75 should be the trigger that gets shares pushing fresh highs.
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