More earnings reports from big banks came before the bell this morning, and the results continue to be lackluster. Wells Fargo (WFC) is trading sharply lower after missing revenue expectations and only barely reaching the estimated EPS number. The sector continues to go through a retrenchment, and it seems a logical step to reduce expectations for the group going forward. Citigroup (C) beat expectations in its report, which excluded credit valuation adjustment. The stock is slightly higher following the report, but weakening.
On a technical basis, the day that jump-started this rally was Tuesday, October 4th when the market put in a bullish outside reversal day. At the time the market was extremely oversold, with short interest reaching record levels, and the reversal put bears on their heels. Smart money seemed to believe Europe had come to an understanding regarding a debt-resolution deal, and within 9 days the market was 12% higher. Last Monday and Friday were also strong follow-through days, which show directional commitment.
Upside resistance for the market stands at 1235, with then heavier resistance at 1245-1255, which is the broken neckline from the Head and Shoulders pattern from late July. The 200-day moving average stands at 1276.
Support is 1215-1220, and since the rally has started the market hasn't retraced more than the 20% zone, showing extreme strength. The 1204-1206 zone would be the next level to watch, and the new line in the sand is 1187-1195.
*DISCLOSURES: Scott Redler is long SPY, AAPL, and AAPL October calls
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