Major averages were up slightly on lower volume as they form wedging patterns. Overall the action has been relatively quiet as the market awaits this week's Fed meeting. The two-day meeting of Federal Reserve policy makers starts today and the Fed is expected to reinforce expectations of further monetary stimulus by extending the existing "Operation Twist" bond-buying program that expires at the end of the year with new monthly purchases of $45 billion of Treasury bonds.
In other news from over the weekend, Italian Prime Minister Mario Monti said he would step down just a year after taking the post causing the Italian bourse to lose more than 2% while other European bourses closed mixed.
SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) were also slightly up on lower volume. While a bona fide buy signal has not yet occurred in the precious metals, our view is that the metals are still working on large consolidations with a new upside leg to come at some as yet undetermined point. Economists expect that the U.S. budget deficits will continue for the forseeable future and that little will be done to address the growing U.S. debt mountain. Longer-term, this has to be bullish for the precious metals and thus they should be closely monitored for any potential buy signals that may emerge over the coming weeks and months.
Priceline.com (PCLN) gapped below its 50-day line on heavy volume to close just above its 200-day moving average. Deutsche Bank cut PCLN to hold from buy citing increasing competition. PCLN was looking as if it were trying to build a new base, but Monday's action places this in question. Apple (AAPL) continues to flirt with its recent lows, finding support yesterday in the 520 price area. The stock may be in a position to stage a reaction rally, but we still consider the 550-560 area as potential resistance. News regarding consumer interest in an iTV product is sending the stock up over 1% pre-open this morning. Should AAPL make it through the 550-560 zone of resistance, then the 50-day moving average at 596.79 comes into play as the next point of resistance in the pattern.
Polyone (POL) issued a pocket pivot buy point yesterday as it moved to an all-time high, although it remains a relatively "immature" stock given its $20 price tag. Investors should exercise caution in taking new long posiitions, and in most cases we would suggest taking smaller positions than normal and letting the stock prove itself first before looking to build a larger position.