The markets sold sharply early in the day as Fiscal Cliff worries continue to bubble up. In addition, Apple Inc. (NASDAQ:AAPL) collapsed lower, dropping to $545.56, a drop of $30.39. The iPhone maker continues to see end of year tax selling and worries over future growth after missing two quarterly earnings estimates in a row.
By mid-morning the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) was down to $140.37, a loss of 0.88. At this point the President came on television to make what seems to be his daily Fiscal Cliff update. For the first time since this fiasco began, his comments seem genuinely dovish towards reaching an agreement with Republicans. The market sensed compromise and began to rip higher. The SPY turned a 0.88 loss into a gain of $0.80, a whopping $1.68 reversal.
With compromise in the air, the market hopes to avoid the Fiscal Cliff. For the first time since this mess began, the President seemed to say "we can meet in the middle somewhere".
The charts spelled this move up out perfectly. Not only did the SPY hit key support at $140.45 but there was a perfect bottoming tail at the lows. A bottoming tail is a reversal signal and oh did the markets reverse. Upside intra day resistance on the SPY is at $142.05, $142.30 and $142.90. Downside support will remain as the low of the day at $149.37.