Trader's Edge 7-19-12

The S&P 500 traded up nearly 70 basis points in yesterday's trading and looks set to open higher, following world markets up. This is despite Spanish yields trading up over 7% (however we note that Italian yields are down in today's trading). We had reports from tech bell weather stocks yesterday, including Qualcomm, IBM, and EBAY. All the stocks for these companies are trading up in early morning trading, despite a mixed bag in earnings.

We would watch trading in IBM shares closely for a sign of investor sentiment and market direction, given its shares of the Dow Jones Industrial average.

The stock looks to be bouncing into the $193 level in early morning trading, an area of near term resistance. The stock looked oversold on the stochastic prior to yesterday's report and the bounce may  represent the market building cause for lower prices. We note that despite raising guidance that revenues were below consensus estimates due to a weak tech spending environment. We will have to take a closer look at the reported earnings and estimates here.

We will also be closely watching the market action today. We have not decided to add to our short exposure, but note (As a side note, we use ETF's and mutual funds to gain short exposure. Our vehicle of choice are the Active Bear ETF, ticker HDGE and the Girzzly fund, ticker GRZZX). that the market looks to tiring into this bounce. Look for a rejection of higher prices as this would suggest a forthcoming downside move.

We continue to see weakening momentum and strength characteristics in the market's technicals. We also think that the lack of a clear path on monetary stimulus actions and a flat lining economy suggest lower stock market prices. We shall see.