Market Alert - Last Hour

The market has had quite a day, gapping upside, moving higher to midday, then working laterally into the last hour. Of course stocks gapped upside with the indices and many are holding gains.

SP500 41.38, 2.18%
NASDAQ 109.92, 2.18%
DJ30 324.78, 1.81%
SP400 1.85%
RUTX 2.14%
SOX 2.74%

That said, many upside plays gapped sharply higher than entry points making us not want to chase. We did get good entries on LRCX and NVDA, but most gapped too far to chase -- PARTICULARLY given the election is still tomorrow. I don't know what to make of the outcome but I am not as sanguine as the market that there is nothing but upside from here.

Thus, we are not chasing upside AND, unless there is more significant movement upside, we are not going to close many downside plays. The reason for the latter is that many gapped and rallied with the market, but have moved right into resistance in various forms. E.g. CSCO rallied to fill its downside gap and backed off. SPY is at the September low/20 day EMA. ROST touched the 50 day EMA and gave up a large part of the move. DIA gapped and rallied to 50 day MA's at the top of the October range and has stalled. Sure they may continue on if all is perceived well with the election, but that is an open question and this move, while massive and maybe full of a lot of vigor still, could have shot all its ammunition in one move.

In any event, where the plays are now, after such a strong relief surge, leaves no reason to go ahead and sell at resistance. Sure we talked here today about how we wish we had banked more of that downside gain Friday, but we were playing typical market characteristics versus the 'what if?' chance. Oh well.

In any event, after the surge to resistance and an election still to come, it is definitely worth it in our book to let downside plays that rallied into resistance work. Looking at closing PH, however, as it gapped above resistance and is holding the move.



Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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