Morning Call: Risk Aversion Sends Futures Lower Amid China Inflation, More Euro Concerns
US stock futures point to a lower open Monday following another constructive week for the market. Despite a crumbling Eurozone and a dismal labor market in the United States, stocks have rebounded remarkably over the last two weeks. With QE2 over, the surge is either a reflection of the opinion that economic activity is close to picking up, or that some version of QE3 is coming. Not much resolved was over the weekend as far as debt talks. Italy chatter getting louder and now Spain gets thrown in the conversation a bit more often. Mix it all together with a Hangover from an embarrassing jobs report and leads to a down open of 13+ handles. This makes it very tricky, considering Friday some of the best acting stocks ignored a lot of the same news and acted well. On Friday we talked about, “can anything go green”? I guess the same question stands today, can any sectors help lead us out of the red today?
S&P’s and some indices have a small island top (very bearish). This is when shorts capitulate and longs get trapped. If we have a trend down day today and the market doesn’t hold the 50-day moving average. Technicians will start pointing at Friday’s pattern and start clamoring about negative technicals. At this point we need more data. SPY is opening below Friday’s low so this minor floor that was put in last week’s low stands around $133.15. This probably will be tested in the first hour.
The 50day moving average area stands around $131.90-132.10. This area must hold otherwise the market can start to fall apart a bit.
On Friday most key stocks all came well off their lows and some powered higher. I guess look to see if that can happen again. If futures continue to get pressured and these don’t go down, perhaps there can be a trade there. But rarely do you get two days that similar.
These are the best acting stocks to keep an eye on today. See if any can go green or if they can continue to hold the upper levels.
Apple Inc. (NASDAQ:AAPL) made an impressive run last week, surging to a stone’s throw away from all-time highs. It has pulled off this morning with the futures, but it should be watched closely.
Amazon.com, Inc. (NASDAQ:AMZN) has been another monster, breaking well to all-time highs and closing on its highs Friday. Ever since its last earnings report when the company announced heavy investment in its cloud initiative, it has shown relative strength.
Netflix Inc. (NASDAQ:NFLX) is the number 1 place to turn in a market that is squeezing shorts because of its 20% net float short. NFLX was relatively quiet the week prior, but last week it seems many shorts capuitulated and it, too, made all-time highs.
Priceline.com Incorporated (NASDAQ:PCLN) hads been in a steep uptrend the last two weeks, and also looks like it wants to make new all-time highs.
Our cloud computing favorites salesforce.com Inc. (NYSE:CRM) and VMWare, Inc. (NYSE:VMW) have also been strong and made new highs.
The bounce back in the Chinese Internet sector has been ferocious, with the strongest being Baidu.com, Inc. (NASDAQ:BIDU) and SINA Corporation (NASDAQ:SINA). The weak recent IPOs have even been able to bounce, names like Youku.com Inc (NASDAQ:YOKU), Ecommerce China DangDang Inc. (NASDAQ:DANG), and Renren Inc (NASDAQ:RENN).
Other recent IPOs have been strong as well after transitory dips. Early in the week Yandex NV (NASDAQ:LNKD) took a hit, but bounced back strong Friday to get back near pivot highs. Above $36.30 it could get more momentum. LinkedIn Corp (NASDAQ:LNKD) is back to the $100 level and was very strong Friday.
Wynn Resorts Limited (NASDAQ:WYNN) is another one of the strong stocks we like to turn to in an uptrending market, and it is in a steep uptrend over the past two weeks making all-time highs. Las Vegas Sands Corp (NYSE:LVS) is off its highs but was also strong last week.
Retailers have also had a big run, with Lululemon Athletica Inc. (NASDAQ:LULU) the strongest, and Abercrombie & Fitch (NYSE:ANF) and Under Armour Inc. (NYSE:UA) bouncing back. UA looks particularly good for a trade this week sitting just below all-time highs.
Earth moving companies Caterpillar Inc. (NYSE:CAT) and Tractor Supply Company (NASDAQ:TSCO) have also seen big runs, with TSCO at all time highs and CAT recovering from a bout of weakness.
Gold and silver have been much stronger lately, and it will be interesting to see what that’s telling us. Could be that there is much more trouble in Europe that the market is allowing us to look at yet? With the Euro crisis still ongoing, it is important to be on our toes even though there seems to be heavy buying going on in this market. This market hasn’t given you much of a way in if you pride yourself on not chasing, but you just need to continue to be patient. You don’t want to be the trader buying the top after a monster two-week move, but you also don’t want to be the one shorting an uptrending market.
Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader. Scott Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Scott moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, he maintained his status as a top trader in the industry while working closely with all traders in the firm to dramatically increase performance. Scott has participated in more than 30 triathlons and one IronMan triathlon, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business and Bloomberg, and he has been quoted in the Wall Street Journal and Investor’s Business Daily among other publications. Scott produces much of the media and content available to subscribers and followers. T3LIVE.com is an online financial media network and education platform that provides active traders and investors with market analysis, real-time access to strategies, and in-depth training from real traders, real-time.
*DISCLOSURE: Scott Redler is long AAPL, BIDU, LNKD, LVS, SINA, YNDX. Short SPY.
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