Morning Comment: UPS testing key resistance.

The stock market’s bounce yesterday was certainly a good the S&P 500 retraced 2/3 of its losses from Friday. The move came on very good breadth, but very low volume. The breadth was 8 to 1 positive on the S&P 500, so that was quite nice, but volume was the second lowest since February (if you throw out the day before Memorial Day...otherwise it was the third lowest). The MUCH better data on Pending Home Sales got much of the credit for the that number jumped a whopping 44%. However, it is not out of the realm of possibility that some month-end window dressing...and some make-up from Friday’s Russell Reconstitution...may have played a role in the bounce as well.

The advance took the S&P back above its 200 DMA, but it’s still quite close to its all-important 3,000 support level, so the stock market is far from being out of the woods. There are certainly some reasons to believe that this bounce can hold up for a few days more. Chairman Powell and Secretary Mnuchin speak in front of Congress today...and Mr. Mnuchin is sure to paint a positive picture about the economy. Also, today is the last day of the quarter, so we would see some quarter-end window dressing. Finally, we have a long weekend coming up...and the market tends to do well around long weekends.

Of course, there is no guarantee that yesterday’s bounce will last longer. Let’s face it, the last time Mr. Powell spoke publicly, it created a downdraft in the market place. In fact, they pre-released his opening comments...and he is going to warn the country that the re-opening of the economy could create as many problems as it solves (and might even create more problems than it solves). Therefore, we could still some wild swings this week.....It’s also a good bet that this will be the last day that will have much liquidity in the market place. (We’d emphasize the phrase “market place” in that last sentence. We’re not talking about “Fed liquidity,” we’re talking about the ability amount of action/volume that will take place over the last two days of the week.)......We have the long weekend coming up and a lot of people have not been able to get away this year. With the 2nd quarter behind us and earnings season still in front of us, there will be plenty of excuses for investors to turn off their machines and avoid the markets for a couple of days. So unless we get some big news, things should be very quiet after today.

That said, “getting some big news” at ANY time is not out of the question now-a-days, so keeping at least one eye on the markets throughout the rest of this week should be important. With this in mind, we’re going to keep a close eye on UPS over the coming days. This stock made an important “lower-low” back in March, BUT it has been acting VERY well since early May.

The stock saw a pretty sharp decline in the second half of April, but it was able to hold its early April lows. That mini “double-bottom” low from April & May was higher than the March low, so it gave UPS a nice “higher-low.” It’s ensuing 22% rally into early June followed that “higher-low” with a strong “higher-high” (well above its April highs. That strong rally left UPS overbought on a short-term basis and it then pulled-back once again into the middle of the month. Since then it has been able to rally back up to those early June highs. In other words, it has made another “higher-low”...and if it can rally above $110.50 in any significant way, it’s going to follow that up with yet another “higher-high.” On top of this, a rise above the $110.50 level will also take it above its 200 DMA.

What we’re saying is that if the broad market is going to hold its all-important 3,000 level as we move into the month of March, one of the stocks that could benefit from a further rally in the stock market in a surprising way is UPS. There is not a lot of resistance for UPS until you get up to the $125 level (its highs from 2018 and 2019), so a meaningful break above $110.50, should be very positive for this stock.

Matthew J. Maley

Managing Director

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Jun 30, 2020 — 8:06 AM
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