Those Who Bet Against the Bull Now May be Sorry

With public optimism strong over Q2 earnings expectations, stocks opened higher Monday. However, the first few minutes of trading saw the high of the day, and the major averages flatlined for the next six and a half hours.

A lagging technology sector, driven lower by a 3.62% plunge in Intel (INTC), lost 0.1%. But money flowing from bond sales continued to drive stocks higher rather than earnings since some analysts estimate that over half of the S&P 500′s companies will miss their Q2 forecasts.

At Monday’s close, the Dow Jones Industrial Average had gained 89 points at 15,225, the S&P 500 rose 9 points to 1,640, and the Nasdaq gained 5 points to 3,485. The NYSE traded 906 million shares and the Nasdaq crossed 396 million. Advancers outpaced decliners on the Big Board by 1.6-to-1, and on the Nasdaq, advancers were ahead by 1.3-to-1.

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Each of the major indices has closed above its 50-day moving average and received a strong buy signal from its MACD.

Conclusion: The bulls are in charge of the market despite some technicians’ continued complaints of low volume, narrow breadth, etc. I was surprised to read that one noted and highly respected analyst is predicting a double-top between S&P 1,650 and the May 22 intraday high of 1,687.18.
But I was also reminded of Joe Granville’s warning that to act on a formation before it is executed is the most common mistake of technicians. And our readers have seen me say that to anticipate a formation is gambling against the trend.

The trend always takes precedence, and it is up until proven otherwise.
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Catamaran Corp (NASDAQ: CTRX)

Catamaran Corporation provides pharmacy benefit management (PBM) services and healthcare information technology (HCIT) solutions to the healthcare benefits management industry in North America. The company operates in two segments: PBM and HCIT. Its PBM services include electronic point-of-sale pharmacy claims management, retail pharmacy network management, mail and specialty pharmacy claims management, Medicare Part D services, benefit design consultation, preferred drug management programs, drug review and analysis, consulting services, data access, and reporting and information analysis. The company offers RxCLAIM, an online transaction processing system to provide online adjudication of third-party prescription drug claims at the point of service, as well as payment and billing support and real-time functionality for updating benefit, price, member, provider, and drug details. It also provides RxBUILDER, a Web-based interface for formulary creation and maintenance; RxPORTAL, which allows customers to interact with the patieny’s formulary and drug history; and RxAUTH, a prior authorization (PA) management solution for automating PA process.
Please take a look at the 1-year chart of CTRX (Catamaran Corporation) below with my added notations:
CTRX has been holding a very important level of support at $46 (lavender) for almost the entire duration of the 1-year chart, and you can see that $46 had also been a resistance prior to that back in August. No matter what the market has or has not done since September, the stock has held that $46 level. CTRX is approaching $46 again and that should provide another bounce higher, but if the overall market sells-off, CTRX could break that support.
The Tale of the Tape: CTRX has a very strong level of support at $46. A trader could enter a long position at $46 with a stop placed under the level. If the stock were to break below the support, a short position would be recommended instead.
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DBC: Bold Analyst Call Says This Sector is an 'Immediate Buy'

Most of the time, analysts make calls that are either pitifully late or laughably safe. I mean, is it really a bold call to downgrade Apple (NASDAQ: AAPL) after it has already fallen 30%? Or, how about upping your target on Tesla Motors (NASDAQ: TSLA) after an 80% spike? Now, I am not saying that calls like these are wrong, just that they aren't very prescient, nor are they very bold.

There are, however, a few analyst calls that are both potentially early, and anything but safe, and I think these are the calls that merit traders' attention. The latest call of this sort comes to us from JPMorgan (NYSE: JPM) commodities analyst Colin Fenton, who now recommends investors overweight the commodities sector.

In a note to clients, Fenton wrote the following: "Our analysis concludes that it is in the best interests of most commodity index investors to buy immediately. For the first time in more than 2 years, we recommend an overweight allocation to commodities. In our own methodology, we define this allocation as a 5% to 7% net long exposure in an institutional portfolio, up from the 3% to 5% directionally neutral exposure we have been recommending."

Now, it's one thing to raise your exposure to a sector that's doing well, but when it comes to commodities, that sector has been virtually slaughtered.  (more)

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A Utility With Huge Upside Potential: FE

The GDP of this company for Q1 was recently revised downward by 25%, from 2.4% to 1.8%.

Yet immediately following the announcement stocks went up…

Huh?

In the black-is-white, good-is-bad world where the Fed manipulates interest rates, we’ve almost gotten used to such reactions.

But upon further analysis, that adjustment could be a big disappointment for the stock market in the long run.  (more)

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Apple Bottoming! Get Ready to Buy: AAPL

Apple (AAPL) — On Oct. 9, the Trade of the Day stated that from a technical perspective Apple should be sold with a downside target of $605: “Despite reduced trading volume due to Columbus Day, enough sellers surfaced to drive the stock’s price through the neckline at $655 on a breakaway gap. This is a classic breakdown — it just doesn’t get any clearer than this.”

The sell opinion was reiterated on Oct. 26 with a target at $587. We recommended covering shorts on Nov. 7, near $570. But on Dec. 6, we went short again near $529, and continued to recommend shorting on Feb. 28, at $440, and April 25, on a bounce to $436.

Now, however, it is clear that all shorts should be covered in light of a possible saucer forming. A close above the resistance line at $465 would signal that a long-term bottom has finally been established.

Apple is expected to earn $41.04 in fiscal year (FY) 2013, ended in September, and the consensus earnings estimate for FY 2014 is $43.59. The mean price target has been increased to $538 from $500, and those willing to take a longer-term perspective may buy Apple with a stop-loss order at $390, below the April low.

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Time to Sell? Downside Risks Rising for U.S. Stocks, Says Dempsey

After suffering a grueling finish to the second quarter, stocks are starting to stage a quiet comeback again, with the S&P 500 (^GSPC) back within 3% of its all-time high after rising 7 of the past 9 sessions. But for all its fortitude in the face of great challenges, fund manager Ed Dempsey of the ATAC Inflation Rotation Fund is troubled by the benchmark's resilience, while disasters unfold all around it.

"Gold (GLD) crashed. Japanese government bonds crashed. Emerging Markets (EEM) crashed. U.S. bonds (^TNX) crashed," Dempsey says, adding that other rate-sensitive sectors like homebuilders (XHB) and utilities (XLU) "are also reacting to spiking interest rates." As these sectors take it on the chin, the broader S&P 500 stands strong, a veritable last man standing if you will.

Despite the S&P 500's resilience, Dempsey notes larger issues do remain. The world's top two central banks are being less accommodative, with the Fed hinting that bond purchases may taper, as well as what Dempsey describes as outright "tightening" by the People's Bank of China.

"The last piece that is left here is the S&P 500," and having "not made a new high in well over a month," Dempsey believes the downside risk for the S&P 500 is very high.

And with no signs inflation on the horizon, he says the bond market has taken it upon itself to effectively "price-in five quarter-point rate increases" by pushing the yield on the 10-year Treasury up to 2.7%.

There is one opportunity that Dempsey likes in this uncertain market: government debt. "Bonds could be a nice buy right here," he says, especially "if spiking rates start to slow housing, and if the stock market corrects."

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