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Are Stocks Bracing for a Pullback?

By  +Follow July 25, 2013 9:47AM
Tickers Mentioned:

As earnings season chugs along, a look at the over equities market shows that stocks may be a bit stretched for the time being. Whether operating results can give investors that extra boost to push the market over key territory remains to be seen. We asked Toni Turner of TrendStar Trading Group for her thoughts in this week's interview.

EQ: It’s still early in the second quarter earnings season, but so far we’ve somewhat of a mixed bag. Financials, however, have had a very strong showing. Does this bode well for the market?

Turner: Yes. In fact, if it weren’t for the companies in Financials, corporate earnings would be negative. That’s how well they’ve done. If you look at the monthly chart of the Financial Select Sector SPDR ($XLF), we can see that the XLF made an all-time high on May 2007 at $38.15. As you know, it moved in a downtrend from that high down to its March low at $5.88. It closed at $20.64 on Wednesday, so it definitely has a ways to go to reach 2007 highs. Still, the XLF has definitely been in a nice uptrend since July 2012.

If we go from the monthly chart,  to a daily chart, then we see more detail. We see that the leaders of the Financials and top components of the XLF, such as JPMorgan Chase ($JPM), Wells Fargo ($WFC), Bank of America ($BAC), and Berkshire Hathaway ($BRK-A), got ahead of themselves in  the short term. Now, I suspect  the financial sector  is  due for a dip. The housing recovery has certainly given momentum to the the regional banks in the SPDR S&P Regional Banking ETF ($KRE). Regional banks  are still moving higher,  closing on their highs, and appearing unstoppable—but of course, we know better than that.

I suspect that the KRE will succumb to a little profit taking pretty soon because nothing goes up forever. From a big picture perspective though, we want strong banks and for them to continue to be strong because that’s good for the economy.

EQ: You’ve been watching the PowerShares QQQ ($QQQ) for a while now and observed that it was a bit overstretched. Now that Microsoft ($MSFT), Google ($GOOG), and Apple ($AAPL) have reported, do you think the investors may be looking to take profits out of Tech?

Turner: Apple certainly held up the QQQ on Wednesday.  But Microsoft, Google, and Intel are losing some altitude here, and in general, Tech has come out with some disappointing earnings. The QQQ is trading above $74, but there’s an open price gap from earlier in July, and it’s a gap that needs to be filled between $75 and $73.

Since Wednesday was not an up day, and we’ve had two days to the downside, meaning two red candles in a row. Usually, it tells us that even though they’re trading within the same price range, it may indicate that people are taking profits here. While I can’t project what will happen, I wouldn’t be surprised to see the QQQ come down to at least $73 in the near future.  

And  if the QQQ can’t hold support there, then  it may take another leg down to the 71.50 level.

EQ: The S&P 500 walked up to the 1700 level and pulled back this week. What are your thoughts of the likelihood of it breaking through? What are the implications if it fails to do so?

Turner: It did pull up to almost 1700, and I think a lot of it had to do with expectations that it would, and so it did. That’s a good thing, but markets usually get softer in the summer. We have seen very little of that happening this year, except for the small dip we experienced  in mid-June.

Now if we look at the 14-day relative strength indicator (RSI), it is pointing lower. . I think the market is tired here and a lot of people are gone for the summer. If interest rates begin to climb here—and certainly, it looks like that may happen again as the 10-year bond has fallen off—it may remind us of the upcoming Fed’s tapering.   

I went through hundreds of daily stock charts on Monday, looking through the components from many of the major  indices, and  a hgh percentage of those stocks  were extremely overbought, and trading in nosebleed territory. And, of course, valuations are rising.. I wouldn’t be surprised, and I certainly wouldn’t be upset if we took a breather, here.  It would provide promising opportunities to enter new positions.

EQ: Are there any sectors or industry groups you’re watching right now?

Turner: I’ve gone through a lot of the sectors and other things that I normally watch, and except for maybe a few stocks, I’m really not really excited about going long on much of anything right now. That doesn’t happen to me very often. That said, if we see an orderly dip in the regional banks and the KRE, I will be watching for entry opportunities in that part of the financial sector.

EQ: What are your thoughts on adopting a short strategy right now?

Turner: Despite its warts, the market is in a textbook  uptrend right now, and while you might be able to short an individual stock, you would be going against the prevailing direction of the trend. So the odds of success can be less than selling short in a downtrend, or substantial market weakness.  less. You can short the pullback in day trades , but if you are not nimble, you can get stopped out quickly.  It just takes one talking head on TV or in an article to make one comment to spark the market to move back up--and you end up getting caught in a short squeeze that can result in an unnecessary loss. .

Results for xlf
Steffen Cairbre
16 Apr 14 03:32:06
$XLF What To Expect From Bank Of America In Roller Coaster Bank Earnings Season http://t.co/Sebebqvbku
Steffen Cairbre
16 Apr 14 03:09:45
$XLF Bank of America: Here’s what investors can expect http://t.co/NSCRmMcF6e
Steffen Cairbre
16 Apr 14 03:09:44
$XLF Surveying Recent Bank Performance; Needless Risk-Seeking Emerges http://t.co/KHz8mGu3Qp
Stock Forums
16 Apr 14 02:19:45
Share your opinions about $XLF with 12,000+ active traders today! Click Here: http://t.co/9xWOyefkZW Trending $PFNO $SH $HD $GGSM
Seeking Alpha
16 Apr 14 02:14:41
Surveying Recent Bank Performance; Needless Risk-Seeking Emerges http://t.co/MmHIh002ri $C $JPM $KBE $WFC $XLF
Jim Smythe
16 Apr 14 00:04:29
$ES_F $XLF Banks getting out of HFT, Investment Banking and will Focus on Loaning Money & Wealth Advisory (Cough, Cough)
Jim Smythe
16 Apr 14 00:01:49
$ES_F $XLF Credit Suisse Hitting the Crapper
15 Apr 14 21:20:10
http://t.co/QzFp1WC0ss danrocks: $XLF On Watch $PMCM $TFER $GM $EXC $VXX: danrocks http://t.co/QVtKOUs4zp http://t.co/QzFp1WC0ss
15 Apr 14 21:20:08
http://t.co/QkCFZ8q0T8 danrocks: $XLF On Watch $PMCM $TFER $GM $EXC $VXX: danrocks http://t.co/x6G70siv4I http://t.co/QkCFZ8q0T8
O T P i c k s . com
15 Apr 14 21:20:05
http://t.co/awZxDQ0zpX danrocks: $XLF On Watch $PMCM $TFER $GM $EXC $VXX: danrocks http://t.co/LJIyFoxkM7 http://t.co/awZxDQ0zpX
15 Apr 14 20:08:10
Just a couple midweek thoughts regarding $IBB and $XLF. https://t.co/GCAQkF1QmO
Stock Forums
15 Apr 14 18:11:20
Share your opinions about $GGSM with 12,000+ active traders today! Click Here: http://t.co/fMwehQyU9e Trending $DIS $XLF $MELY $ZU
Steffen Cairbre
15 Apr 14 16:53:05
$XLF [video] Mike Mayo: 'Definite buyer of Citi here' http://t.co/AO3Pv20FUi
Stock Forums
15 Apr 14 16:38:51
Share your opinions about $DDD with 12,000+ active traders today! Click Here: http://t.co/uZEdqULh2y Trending $EEM $VLO $TRV $XLF
Steffen Cairbre
15 Apr 14 15:57:08
$XLF Navigating The Icarus Market: Monthly Survey Of The Economy, Rates And Markets http://t.co/ONtx863Z3G
Declan Fallon
15 Apr 14 15:45:03
#sectorbreadth [80] $XLU > [60] $XLE > [40] $XLP > [30] $XLB > $XLF = $XLK > [20] $XLI > [10] $XLY > $XLV. $SPX bullishness up to 39%
ETF Trends
15 Apr 14 15:01:47
Strategists Get Tactical With Sector #ETFs http://t.co/CeXDPKG3c2 #ETF #stocks #investing $SCHW $XLK $SMH $XLF $IAI $RCD $RYT $RYF
15 Apr 14 14:31:49
Top Shorted Stocks 04/15/14 1. $EXH 86.58% 2. $MDR 85.52% 3. $PGX 83.32% 4. $XLF 82.34% 5. $XLU 82.31% 6. $JNK 81.16% 7. $BND 80.79%...
15 Apr 14 14:31:47
Top Shorted Stocks 04/15/14... 4. $XLF 82.34% 5. $XLU 82.31% 6. $JNK 81.16%... http://t.co/Am6ZyxAunb
15 Apr 14 14:13:18
Index/Sectr $DIA, $SPY, $QQQ, $IWM, $XLB, $XLE, $XLF, $XLI, $XLK, $XLP, $XLU, $XLY, $XRT, $XLV, $IYT http://t.co/FvxVrsiXed
Jeff Bushman
15 Apr 14 13:35:39
15 Apr 14 13:20:27
If they really want to mess with everyone's head this market gaps down tomorrow. $SPY $SPX $DIA $XLF $INTC $YHOO $AAPL #HFT #ALGOS
15 Apr 14 13:12:38
RT @SergeantRoca: RT @MedvedevRussiaE: There is foreboding of a civil war in #Ukraine https://t.co/DYZAoNjsSz @zerohedge $XLF $QQQ $SPX #eu…
Pulsar Investments
15 Apr 14 12:43:23
Huge intraday reversal for the markets $SPY $QQQ $XLE $XLF. Our anticipation in weekend notes - a weekly reversal bar is optimistic now!
Jaron Baker
15 Apr 14 12:22:35
$XLF [video] Mike Mayo: 'Definite buyer of Citi here' http://t.co/7JstWENHz1
Marco Di Dionisio
15 Apr 14 12:19:11
Having said that, there is some volume behind some of the up moves today $FB $IWM $XLF and esp $TWTR
Steffen Cairbre
15 Apr 14 11:54:13
$XLF What To Expect From Bank Of America In Roller Coaster Bank Earnings Season http://t.co/Sebebqvbku
Gary Hudson
15 Apr 14 11:42:37
What To Expect From Bank Of America In Roller Coaster Bank Earnings Season $BAC $XLF $FAS $FAZ $UYG http://t.co/M6X57EcNBZ
15 Apr 14 11:42:29
@hmeisler That's good for banks, right? :) $XLF
Patrick Grattan
15 Apr 14 11:02:04
$XLF best performing sector.
15 Apr 14 10:35:12
$XLF $FAS lets do it!
15 Apr 14 10:29:07
$XLF $FAS holding up surprisingly well...
Seeking Alpha
15 Apr 14 10:26:16
What To Expect From Bank Of America In Roller Coaster Bank Earnings Season http://t.co/tEg0KZtvXM $XLF $FAS $FAZ $UYG $BAC
Seeking Alpha
15 Apr 14 10:02:45
Navigating The Icarus Market: Monthly Survey Of The Economy, Rates And Markets http://t.co/LfBXwRz5du $SPY $DIA $QQQ $XLF $XLK $IYH
15 Apr 14 09:55:20
I think short sellers are pissed with me in $JOEZ - im still a buyer.Cmon, make it cheaper! $spy $gdx $xlf $aapl $ung
ETF Database
15 Apr 14 09:46:03
Must Read for Beginners: How To Spot #SectorRotation with #ETFs --> http://t.co/h0zArmP9tQ --> $SPY $STUDY $XLF $XLE http://t.co/sPekEZ9ITQ
Steffen Cairbre
15 Apr 14 09:12:33
$XLF Morgan Stanley upgraded to buy from neutral http://t.co/XDrnzQnK0N
Extreme Stocks
15 Apr 14 08:52:42
danrocks: $XLF On Watch $PMCM $TFER $GM $EXC $VXX http://t.co/k0MNhGDJRZ
15 Apr 14 08:44:54
$F Candlesticks $F Most recent stock chart and technical analysis. $UUP $TZA $XLF $PLUG $SPLI $VXX http://stoc http://t.co/y9Xxbs3fZG
ETF Godfather
15 Apr 14 08:43:22
Great note on how some strategists use sector #ETFs, including equal weight thanks to @ToddSPCAPIQ http://t.co/1PlfB5ME9V $XLF $RCD $SMH
15 Apr 14 08:41:25
$XLF On Watch $PMCM $TFER $GM $EXC $VXX http://t.co/yDv74xIbNg
15 Apr 14 08:33:33
$ITNS Itonis Inc (ITNS) 0.0142 -0.0018 (-11.25%) $XLF $DUST $CVX http://t.co/mrJDA3oyCY
15 Apr 14 08:18:43
$ARTX Candlesticks $ARTX Most recent stock chart and technical analysis. $TWTR $DANG $FITX $XLF $GNCP $QLD htt http://t.co/34iS89anEe
Market Newswire
15 Apr 14 08:16:47
Morgan Stanley upgraded to buy from neutral - http://t.co/4icqE8WTXj $BAC $MS $XLF #investing #headlines #stock
Interactive Brokers
15 Apr 14 08:03:13
#IBTI Securities Lending - SLB Update: Most Shorted ETFs - http://t.co/NfCYdMuA3K $XLE $EWZ $EEM $SPY $GDX $GLD $XLF $UNG $QQQ $IWM $XLE
15 Apr 14 07:54:29
$XLF Financial Select Sector SPDR (XLF) 21.52 +0.07 (+0.33%) $HESG $FROZ $CSCO http://t.co/pExliShGu4
15 Apr 14 07:41:22
$BLTA Starting to get interesting $CTIC $QIHU $TTDZ $XLF $GHDX http://t.co/XokhMNuhF6
Financial Iceberg
15 Apr 14 07:16:42
SP500 Financials Weekly: Underperforming SP500 ? $SPY, $SPX, $ES_F, $XLF http://t.co/aX3OR2iVlO
15 Apr 14 07:09:12
KEep your eyes on $JOEZ -short sellers getting tired.Im still buying it up. $spy $gdx $ung $aapl $xlf
15 Apr 14 07:08:49
Eep your eyes on $JOEZ -short sellers getting tired.Im still buying it up. $spy $gdx $ung $aapl $xlf
By  +Follow July 25, 2013 9:47AM



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