Syria, Tapering, Summers, Debt Ceiling Team Up to Weigh on Futures
Scott Redler: There are lots of red arrows around the world as the situation in Syria intensifies. In addition, there are a few other potentially negative headlines in the US that could weigh on equity markets. The Fed tapering talk continues, a report on CNBC last night cited a source close to President Obama saying Larry Summers could be named the next Fed Chairman within the next few weeks (he is more hawkish than the other candidate, Janet Yellen), and many are not also casting an eye toward the next debt ceiling debate, which could become an issue as early as October.
While you have to be in tune with the headlines, I like to let the market do the talking. The first shot across the bow for some “risk off” was August 8th when we broke back below S&P 1698ish (SPY $169.85). The next warning sign was when the Bears defended that level for multiple sessions. The next key day was August 15th when the Head and Shoulders Pattern triggered to the downside as the SPX sliced 1676-1682 (SPY $168.40ish). This move led the markets down to a pivot low at 1639 (SPY $164.19). Then markets became oversold enough for us to play a tactical bounce that lead to a mid-range reversal yesterday (RDR).
The S&P was working on its third bounce day and traded up through 1664 (SPY $166.83), squeezed a bit higher to 1669 (SPY $167.30), and then failed at resistance (also gap resistance). Active/intermediate market participants who know what the “Red Dog Reversal” is were able to reduce risk again as we traded back below SPX 1664 (SPY $166.83). Those looking for a short signal were able to lay some out there.
Today S&P futures are down 10-12 handles. We have some support at 1645 then 1639. The 100-day now stands at 1636 with a very big level around 1620-1626. I do think this area needs to hold for hopes of new 2013 highs. The 200-day is all the way down at 1557ish, which lines up with the lows from June 24th. No one truly knows where the markets will go, but if you are in the right position you can measure levels along the way and embrace the volatility.
In today’s Morning Call we will talk some levels in the “go-to names” that all had nice moves but look a little extended.
Netflix, Inc.(NASDAQ:NFLX) had nice upside follow-through yesterday after it triggered our action area long price of $274 on Friday. The stock gave us a nice two-day move before seeing some selling with the pull back in the market. Short term support stands at Friday’s high of $278.40, and below that we have yesterday’s low of $274 as the next key short-term support.
Apple Inc.(NASDAQ:AAPL) had some nice action yesterday after consolidating for several sessions to allow 8-day MA to catch up. It triggered our action area long price of $503.35 to extend to $510.20 but it couldn’t hold that action area into the close. AAPL has a product event on September 10th