Morning Call: Bank of Japan Joins the QE Party
US stock futures have a positive tone Wednesday morning as the Bank of Japan joins the QE party. The BOJ, following the announcements of new bond buying programs by the ECB and US Fed, announced today it will make an additional $126 billion in asset purchases in hopes of stimulating a slowing domestic economy. Additional purchases were expected from the BOJ, but the size of the new program may not have been factored in. The Yen dropped versus a basket of world currencies, a development welcomed by the BOJ.
European stocks advanced for the first time in three days, but retreated from highs of the day after news that German lawmakers are working to limit the ECB’s proposed supervisory role under the EU’s proposed plan for a region-wide banking system. In addition, concerns still linger regarding the territorial dispute between Japan and China. Some officials in China, Japan’s biggest creditor, have proposed dumping Japanese bonds in retaliation to the country’s pugnacity.
Over the last two days, the market has digested the recent breakout well, and the 8- and 21-day moving averages have been able to play some catch-up. In the Active Trading Course, we teach the importance of allowing short-term moving averages to catch up to price following rally extensions. The McClellan Oscillator went from +60ish Friday to less than 30 after yesterday. During this digestion process leaders were not just sitting around; many were making new highs.
Microsoft (NASDAQ:MSFT) remains largely unchanged this morning despite news that the board has approved a plan to hike the quarterly dividend by 15% to 23 cents a share. MSFT may not be the growth monster it used to be, but presents investors with both price appreciation potential and a very solid dividend.
General Mills (NYSE:GIS) is up 2.5% pre-market after reporting fiscal first quarter profit rose 35%. GIS is not a stock that comes on our radar to trade often, but it has a bullish set-up as it opens out of a base. 52-week highs are not out of the question today.
Oil prices continued their decline overnight, which we often track using the United States Oil Fund (NYSE:USO). Oil saw a 3% spike down during Monday’s session that baffled some traders, but now many are pointing to a confluence of factors weighing on oil. Demand is weak as the world economy slows, and the White House could be prompted to release strategic petroleum reserves amid rising tensions in the Middle East.
Apple (NASDAQ:AAPL) must remain on the radar of any active trader as it continues to make all-time highs. The stock printed up near $704 after hours but is weakening as the morning wears on. It will be important to see whether AAPL can digest above the psychological level of $700, and possible extend from there.
The other tech standout, Google (NASDAQ:GOOG), held the 21-day moving average well on the pull back early last week, and is now making new 52-week highs. All-time highs from late 2007 are now in sight, and it appears you can trust dips in this stock. Google has been listed repeatedly as a go-to long on our nightly Off the Charts newsletter.
Many traders have been on their toes for a possible pull-back, but the retracement action has been very tepid and shallow. The market is showing extreme strength by simply resting and digesting at upper levels, and could get another leg to new 52-week highs if we can rest a little longer. Continue to play leading stocks on dips in intermediate-term rallies like this.
Be sure not to miss the T3Live Active Trader Super Conference on October 6-7 in New York City at the Marriott Marquis in Times Square. I will be making two presentations, and the rest of the T3Live team will be presenting actionable strategies and tactics as well. We will also have a few high-profile guest presenters that will add even more value to the proceedings. It is truly going to be an amazing weekend, and comes at a very reasonable price!
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 Invest.
Scott is currently the Chief Strategic Officer of T3 Live and is a Registered Associated Person of T3 Trading Group, LLC.
*DISCLOSURES: Scott Redler is long AAPL, GOOG, LNKD, FB, MCP, XLF, MSFT. Short SPY.