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Stocks Edge Back Up: Short Covering or Sustainable Rebound?

By  +Follow June 27, 2013 1:23PM
Tickers Mentioned:

SqueezeThe market opened up the week with a sharp move lower, but has been gradually working its way back up. Is this mini-rally a sign of strength or a trap for bulls? Equities.com asked Toni Turner of TrendStar Trading Group her thoughts in this week's interview, and where she thinks the opportunities are in this market.

EQ: The market got a scare earlier this week sparked by significant concerns coming out of China. Despite some intraday volatility, the major indexes seem to be edging up again. What are your thoughts on the movement so far?

Turner: We have two primary concerns. We have China's potential credit bubble, and we have a sudden rise in interest rates in the U.S. that can potentially give a belly punch to our economy just as it is showing signs of getting on its feet. To me, the move down is understandable, but now we will see if Monday was the so called "bottom" of this move lower on the S&P 500, and if the rebound we are enjoying now is sustainable.

We also had some good news this week with the Case-Shiller index and durable goods orders, as well as other economic reports. Of course, some of the recent bounce in the past few days has been due to a short squeeze. So I don't assume this short term rally is necessarily a signal that everything is OK now. I'll need at least a few more days to see if this is simply short covering or if investors are really getting back into the market.

We have to remember two things: the market typically moves higher heading into a holiday—July 4 is next Thursday—and we are closing out the second quarter, which means there's window dressing right now as we close it out. So next week being a holiday week is going to be shortened and it may be a bit flat, with many institutional traders and investors on vacation. But I believe the week of July 8, we're going to get a reality check.

EQ: Longer-term investors may not like the short-term volatility that we're starting to experience in the market, but for active day traders, does this mean more opportunities to take advantage of?

Turner: Absolutely. Short-term traders like volume and volatility. That's our mantra. We can't make money in a flat market. To that point, the last move down and then the quick rebound off of the low gave nimble traders quite a bit to work with.

EQ: Regional bank stocks have been getting more attention, as you tweeted recently. Is this because they stand to benefit if and when the Fed begins to taper the stimulus program?

Turner: That's part of it. Naturally, if interest rates move higher, banks as a whole, will benefit as they can charge customers higher interest rates on loans. Additionally, the Case-Shiller 20 City index came in this week 12.1 percent improved in home prices over the same period last year. Regional banks typically benefit from improving home prices. Plus, we have an infusion of foreign buyers coming into the U.S., mainly from Asia, who are buying up properties, and I know for a fact that certainly not all of them are paying cash. Many of them are financing these purchases. That stands to benefit regional banks.

Also, if you noticed, regional banks did not fall off a cliff when the market moved lower. If you look at the SPDR S&P Regional Banking ETF (KRE), when the market moved lower, the KRE remained above its 50-day moving average, and many of the banks in that space have moved higher over the last few days.

EQ: What are some other stock sectors and industry groups that look appealing to you? Which ones do you want to avoid?

Turner: I do like the regional banks and the KRE on a pullback to between $33 and $33.25. It jumped up over the last couple of days.

If bond prices actually find a low here, and start to rise in the next few days, I might tiptoe into the iShares Dow Jones US Real Estate (IYR). Mostly though, except for quick trades, I'm standing on the sidelines and I'm waiting for the market to decide what it's going to do next.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for KRE
22 Oct 14 11:57:32
Call/Put Highest % volume changes: Calls: $SMH, $NEE, $ASH, $SNE, $ADHD Puts: $KRE, $WWE, $WU, $LTM, $NOK.
Market Int Center
22 Oct 14 10:48:45
S&P Regional Banking ETF SPDR $KRE Showing Bearish Technicals With Support At $36.72 ( http://t.co/PIlRbB0y6R )
Livevol Community
22 Oct 14 09:00:06
HIGH PUT VOLU $LTM 1871% $TGTX 1786% $FTNT 922% $OC 901% $KRE 755% $TUP 709% $AAP 677% $CHMT 637% http://t.co/gwzPxhnztr
Livevol Community
22 Oct 14 08:49:03
Block Trade: 11:33 $KRE Nov22 32 P (PHLX) 0.07 30000x Today's Full Report: http://t.co/GAgdQYAYhu
21 Oct 14 14:31:45
Top Shorted Stocks 10/21/14... 20. $EEM 70.70% 21. $PFF 70.34% 22. $JNS 69.23% 23. $USO 69.16% 24. $KRE 69.11% 25. $VEA 68.74%
21 Oct 14 14:31:43
Top Shorted Stocks 10/21/14... 22. $JNS 69.23% 23. $USO 69.16% 24. $KRE 69.11%... http://t.co/Iv65vVzyhc
John L. Person
21 Oct 14 12:25:24
$XLF & $KBE up sharply it's the $KRE outperforming so watch $BAC & $ZION for a pullback to buy next few days, i'll cover for TTU in the AM
J.C. Parets
21 Oct 14 08:33:15
here's what I see in regional banks $KRE price below the lower of two converging trendlines. Do you like this? http://t.co/AVdaM2Y4mt
G. Thomas Lackey Jr
20 Oct 14 05:47:37
Financials breadth composite $IYF $XLF $IAI $IAT $IAK $KRE http://t.co/VLahq5QPfd
17 Oct 14 14:32:56
Top Shorted Stocks 10/17/14... 19. $KRE 68.51% 20. $QQQ 67.91% 21. $CX 67.49% 22. $SU 67.46% 23. $RSX 67.27% 24. $CLR 67.06%...
17 Oct 14 14:32:53
Top Shorted Stocks 10/17/14... 19. $KRE 68.51% 20. $QQQ 67.91% 21. $CX 67.49%... http://t.co/4VWkCCxuyO
Otto Max Investments
17 Oct 14 12:46:06
Crude, $SPX, $ES, $KRE, $QQQ r all making progress today-accumulation taking place.Nothing spectacular but higher closes for all.Baby steps!
Market Int Center
17 Oct 14 10:24:04
S&P Regional Banking ETF SPDR $KRE Showing Support Near $34.64 ( http://t.co/s1BVwSt8Ef )
Old Bull Lee
17 Oct 14 09:25:10
Old Bull Lee
17 Oct 14 07:00:42
Banks are seriously lagging today $BKX $KRE. But the day is young.
Ben Silverberg
16 Oct 14 18:38:00
Leading market sectors higher Thursday included: $IWM $KBE $KRE $XLE $XME $XLI $XLB $IYT $SMH $IBB $TAN $KOL $USO
16 Oct 14 14:31:57
Top Shorted Stocks 10/16/14 1. $SHY 91.00% 2. $KRE 83.70% 3. $RGC 83.24% 4. $UST 81.94% 5. $VOO 80.77% 6. $MT 78.51% 7. $AINV 77.66%...
16 Oct 14 14:31:54
Top Shorted Stocks 10/16/14 1. $SHY 91.00% 2. $KRE 83.70% 3. $RGC 83.24%... http://t.co/tZYcJSGuC2
Otto Max Investments
16 Oct 14 13:46:35
Crude, $KRE & ES all demonstrated constructive action for yesterday & today. Bullish continuation tomorrow OPEX day? http://t.co/r8HYHSA0at
Market Int Center
16 Oct 14 09:10:04
S&P Regional Banking ETF SPDR $KRE Showing Bearish Technicals With Resistance At $37.20 ( http://t.co/eyzTONF0N4 )
Ben Silverberg
15 Oct 14 18:09:31
Leading market sectors lower Wednesday included: $SPY $QQQ $DIA $XLF $KBE $KRE $IYR $XLV $XLU $XLY $USO $DBA
Kristen Scholer
15 Oct 14 13:02:22
Wild ride on #WallStreet. Dow drops 460 points - its worst intraday point drop in 3 years - before recovering to close -173. Banks $KRE lag.
Keith McCullough
15 Oct 14 12:08:10
Regional Banks $KRE -3.3% (our preferred way to express lower rates all yr long, on the short side) looks like hell
15 Oct 14 10:51:55
RT @allstarcharts: nice to see regional banks leading the way lower. The weak links continue to stay weak $KRE especially on a relative bas…
15 Oct 14 10:46:27
@hmeisler $KRE below H&S neckline https://t.co/8LGjZzDdDZ
15 Oct 14 10:22:32
RT @allstarcharts: NEW POST: Regional Banks Are Breaking Down Hard http://t.co/Ujb7fvIWtI $KRE http://t.co/HrhBpFtP14
15 Oct 14 10:18:43
RT @allstarcharts: oh pretty please tell me more about how we need to buy regional banks because rates can only go higher. Please please te…
Alan Farley
15 Oct 14 09:41:52
$KRE breakdown aka not much confidence in next refinancing boom: http://t.co/0JdzCoyOoU
J.C. Parets
15 Oct 14 09:39:37
nice to see regional banks leading the way lower. The weak links continue to stay weak $KRE especially on a relative basis. Happy 52-wk lows
Livevol Community
15 Oct 14 09:00:02
HIGH CALL VOLU $SNV 1238% $SHPG 582% $RF 433% $KRE 412% $CP 368% $XHB 309% $HSBC 306% $KEY 288% http://t.co/gwzPxhnztr
J.C. Parets
15 Oct 14 08:25:58
oh pretty please tell me more about how we need to buy regional banks because rates can only go higher. Please please tell me more $KRE $TNX
J.C. Parets
15 Oct 14 08:03:13
Regional banks nicely hitting new 52-week lows today.... $KRE very clean chart guys
Briefing Trader
15 Oct 14 07:58:04
Financials & Banks the biggest losers this morning: $XLF -1.9% $KBE -2.3% $KRE -2.4%
Market Int Center
15 Oct 14 07:57:04
S&P Regional Banking ETF SPDR $KRE Showing Bearish Technicals With Resistance At $37.84 ( http://t.co/ZaemB6HMna )
15 Oct 14 07:49:53
Banks, insurers hit hard as higher rate assumption in question http://t.co/RhNjFSiHcM $XLF $KRE $KEY $FBP
Call Me Baloo
15 Oct 14 06:35:39
$KRE triple-bottom break http://t.co/oEcXOzqRZZ
15 Oct 14 04:15:46
@MarketSmith: RT @allstarcharts: Regional Banks Are Breaking Down Hard http://t.co/RPg215XGFi $KRE
Top Stocks
14 Oct 14 10:45:44
RT @allstarcharts: Regional Banks Are Breaking Down Hard http://t.co/kalA24Wx3a $KRE
14 Oct 14 10:45:44
RT @allstarcharts: Regional Banks Are Breaking Down Hard http://t.co/0yIF6nW8DF $KRE
By  +Follow June 27, 2013 1:23PM



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