No Way – Tuesday Recap

 

After 6 bone crushing sessions of selling, today started off on a positive note... albeit a brief one.  China  put a bandage on it's wounded stock market overnight, which put a bid under S&P 500 futures.  At the open stocks were higher, but for the first hour of trade those sellers of the six previous sessions smacked the market senseless - sending it into negative territory.  The small cap  $IWM was pounded under the key $120 level... but it wasn't long before dip buyers swooped in and relentlessly rallied the market to a near high of the day close.

In the chat room I noted the propensity for the market since March 2009 to have that  "buy the dip" mentality.  An hour into the trading session prices would methodically find a bottom and start rallying.  That is exactly what happened today.  The bottom was put in precisely one hour into the trading day.

How about that head and shoulders possibility I opined last night?

It still has some work to do, but today helped move it in the right direction.  There is also a smaller scale h&s on the 10 day chart.  Both make this recovery look like more than a one day affair.

Last night I said for stocks to rally we needed China to cool off - it did (for now)

We needed the VIX to get smacked down.  It did, dropping 14%.  I noted in the chat room via audio that the VIX wasn't moving higher with the morning pull back as you would expect it to.  That was a good indication of what was to come.

and we needed some of the heavy hitters to rally.  Both $IBM and $AAPL found their footing today.

In order for this market to keep heading higher we are going to need the big names to keep moving up.  Let's face it, 6 days of heavy selling in this centrally planned market place is a long time.  And the snap back was indicative of a market waiting to buy the dip.  I think there is a good chance that continues this week.  However we do have the FED tomorrow.  Also more earnings on tap from the likes of $FB and $LNKD.

How about them bonds?  $TLT as I noted last night, came up to kiss the trendline of death.  Today it started to wilt.  I think tomorrows FED meeting could put more downside into focus for $TLT and the bond market.

$TLT dropped .75% today to $121.16

Let's see if the market can start stringing together a winning streak

Earnings Still to come with $LNKD and more.

Today after the bell $BWLD and $PNRA are soaring.  $TWTR and $YELP are selling off.   I was looking for upside for $TWTR post earnings, and it was over the $40 level briefly before succumbing to selling pressure.  $YELP dropped $4 right out of the gate.  $PNRA is over the $200 level for the first time in its history after an earnings beat.  $BWLD is rallying near fresh record highs on a positive earnings report.

The FED is in focus tomorrow.

Stay tuned for the unusual option activity recap later this evening.

From Yahoo Finance:

U.S. stocks closed higher about 1 percent higher on Tuesday as investors found encouragement from some recovery in oil prices and Chinese stocks, amid mixed earnings and the beginning of the Federal Reserve's two-day meeting. ( Tweet This )

"Oil is definitely having a good impact. When you see the price of oil up, that's giving you indications that people are moving into areas that have been hard hit," said Robert Pavlik, chief market strategist at Boston Private Wealth.

However, he said the market could move lower again before ending the year higher. The trade volume is "not enough to convince me the tide has turned," Pavlik said.

The major averages broke a five-day losing streak. The Dow Jones industrial average closed about 190 points higher after briefly gaining more than 200 points, with Exxon Mobil, Chevron and Caterpillar among the greatest advancers.

The energy sector leaped about 3 percent as the greatest advancer in the S&P 500, which closed 1.2 percent higher. Oil recovered to trade near $48 a barrel.

It's a "commodity that has been unidirectionaly lower and you get a bounce," said Art Hogan, chief market strategist at Wunderlich Securities. He noted the recovery in energy stocks helped materials and industrials as the next-best performing sectors in the S&P 500.

Crude oil settled up 59 cents, or 1.24 percent, at $47.98 a barrel, after trading lower for the last four sessions.

Phil Flynn, energy market analyst at The Price Futures Group, noted some short covering ahead of crude inventory data and the conclusion of the Fed meeting Wednesday, amid some stabilization in China.

"China didn't crash," he said. "If China becomes stable the market will focus on their demand-supply which is strong (for oil)."

The Federal Open Market Committee began its two-day meeting Tuesday. No press conference is scheduled at its conclusion Wednesday afternoon.

"The market focus is going to pivot away from Asia and away from commodities and towards the Fed," said David Schiegoleit, managing director of investments at U.S Bank Private Client Reserve.

"If the Fed signals to the dovish side that could point to a rally in the equity market," he said.

Read More September rate hike coming? Not so fast...

China remained in focus, with Shanghai's benchmark stock market closing down 1.7 percent in a recovery from an intraday decline of as much as 5 percent. China's securities regulator said on Tuesday that it had launched an investigation into Monday's selloff, when stocks fell more than 8 percent.

While the Nikkei joined the Shanghai Composite in negative territory, the Hang Seng closed up 0.62 percent.

"Part of what's pushing (the S&P 500) higher is overnight the Shanghai Composite ... ended up rallying on an intraday basis. I think there was some relief on that front," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "So there's a rally in global risk along with (support around) the 200-day moving average which is going to provide some reason for equities to bounce today."

European stocks closed higher, with the DAX up about 1 percent. Stock futures were also higher following the rally attempt in Asia.

Read More Despite bounce, stocks have further to correct-strategists

"I think the market right now is very focused on earnings," said Peter Boockvar, chief market analyst at The Lindsey Group. "We're probably due for a bounce today based on the selling of the last couple days."

On Monday, stocks extended a recent decline with the S&P 500 closing just above its 200-day moving average and the Dow Jones industrial average at lowest level in nearly six months.

"To me it looks like an orderly pullback," said Katie Stockton, chief technical strategist at BTIG. "What's interesting is these pullbacks-even though they're extremely shallow-they generate a lot of skittish sentiment."

She said the 200-day moving average acts more as a "cushion" and that 2,044 on the S&P 500 is a more significant indicator of market deterioration.

In economic news, U.S. consumer confidence for July came in at 90.9, missing expectations and posting a decline from June's read of 99.8.

The Case-Shiller 20-city home price index rose 4.9 percent in May from the same period last month, matching April's pace. The gain missed expectations for a 5.6 percent increase.

The home ownership rate dropped to 63.4 percent, the lowest level since 1967 .

The Markit flash services PMI rose slightly from a five-month low, hitting 55.2 in July. The average for the year so far is 56.3.

Treasury yields held slightly higher, with the U.S. 10-year yield (U.S.:US10Y) at 2.25 percent and the 2-year yield (U.S.:US2Y) at 0.66 percent.

The dollar held higher against major world currencies, with the euro lower at $1.10.