The Trader Daily

 | Apr 17, 2014 | 7:30 AM EDT
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For weeks now, traders have been shunning high growth momentum tech in favor of slower-growing big (old) cap tech. Stocks like Microsoft (MSFT), Intel (INTC), Hewlett Packard (HPQ) and IBM (IBM) have seen their share prices hold strong. While faster growing momentum favorites like FaceBook (FB), Twitter (TWTR), Yelp (YELP) and Workday (WDAY) have been taken to the woodshed. The question now is: Did IBM single-handedly kill the multi-month migration into old cap tech?

Bulls will point to Intel's report and highlight their improving margins and three-plus percent dividend. Bears will scream from the top of their lungs that IBM's disappointing report will force technology investors to reevaluate their positions in value oriented, old cap technology. I know fundamentalists hate this sort of theme -based approach, but like it or not, it frequently pays to view things this simplistically when operating within a short timeframe.

I do not believe IBM's disappointing report will remove the bid under names such as Microsoft and Intel. Intel's numbers (released Tuesday evening) were pretty good, and folks seem genuinely pleased with the product developments and new leadership at Microsoft. IBM, on the other hand, is probably stuck in the penalty box for the foreseeable future. I'd expect shorter-term traders to fade any bounce toward $193, while longer term participants will continue to find comfort in Uncle Warren's sizable position, all the while remaining steadfast in their opinion that the stock is simply too cheap not too own.

As far as the various sector ETFs are concerned, I've noted several times over the past week how poorly the home builders were trading, and this hasn't changed one iota. Anyone stalking weaker sectors should keep a close eye on the iShares U.S Home Construction ETF (ITB). This one looks destined to lead on the downside if and when the broader indices break lower.

The opposite of the home builders would be the Energy Select Sector SPDR Fund (XLE) and Utilities Select Sector SPDR Fund (XLU). Both of these ETFs are at 52-week highs, and showing no sign of letting up. The XLE is being propelled higher by Exxon (XOM), Chevron (CVX) and ConocoPhillips (COP). And as far as the utilities are concerned, one could literally throw a dart and hit a winner. A few of the bigger movers, however, are Nextera (NEE), Exelon (EXC) and Southern (SO). Setting aside my concern with utilities (quasi-bonds) leading the equity markets higher, the bottom line is buyers are still flocking to this sector.

As far as the E-mini S&P 500 (Es) is concerned, our levels for Thursday aren't all that different from Wednesday's. Assuming the market shakes off IBM's weakness, the bulls need to sustain a break above 1856.50 to continue on toward 1869. Any intraday downside momentum is likely to be short lived and actively faded until we see a complete collapse in demand (and session close) beneath 1842.

5-Minute Volume Profile Es

Additional Notes:

1. For those that missed my post in the comments sections beneath Wednesday's report, I cut my iShares Nasdaq Biotechnology Index (IBB) position in half at $220. This sale was for risk management purposes, nothing more. Unless I am stopped on the remainder (three consecutive closes beneath $212), I plan to hold the position toward $230 to $235.

2. The Consumer Staples Select Sector SPDR (XLP), which I am short, has bounced with the broader market and is a whisker away from stopping me out. At this point, I am sticking with my weekly close above $43.33 as my stop.

Any trading or volume profile related questions can be posted in the comments section below, emailed to me at or posted to my twitter feed @ByrneRWS.

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