World markets continue to be subdued as Europe continues to grind lower. Asian were mixed with the Shanghai finishing down 1.9% while the Nikkei did reverse higher to close up 1.2%.
The S&P has been down for five straight days and is almost 40+ handles off the highs of 1729. Some blame it on the potential budge fight and government shutdown. Some blame it on the Fed’s lack of action last week.
At this point placing blame doesn’t get anyone a positive P&L or correctly positioned them for the 4th quarter. Many traders are still a little gun shy as the S&P is only down 2% off the highs. We almost touched the 21-day with a low yesterday at 1691. This is the pivot to use for action with bigger support around 1674-1679. If we reach this area, it would need to hold to keep intermediate upside intact. Resistance stands at 1701-1707.
To get some clues on the market action we measure various sectors and leaders. In today’s Morning Call we will take a close look at the banks which gave some nice calculated long set-ups yesterday for tactical cash flow.
JP Morgan (JPM) outperformed its sector with 2.74% gain after seeing a nice Red Dog Reversal at the 200-day ($50.30 was the action area). The bank closed on highs despite some choppy intra-day action. It’s getting a bit of follow through this morning and has some room to the next resistance of $52.80.
Citigroup (C) also had a calculated Red Dog Reversal at Tuesday’s low of $48.93 to gain 0.61%. It has some resistance at $49.54 as it spent the whole session hovering around this level. A break and close above this could help the stock regain some power.
Bank of America (BAC) has been holding where it needs to at the prior pivot low of $13.98. Building a new base above this level could help the stock resume some upside momentum. Below this there is key support at the 100-day at $13.85.
Wells Fargo (WFC) also had a Red Dog Reversal at Tuesday’s low of $41.70 but it couldn’t find much upside momentum above $42. The stock is trying to hold its 100-day which has been providing solid support so far. Yesterday’s low of $41.29 could be the new pivot to trade against.
Goldman Sachs (GS) has been beaten up since being added to the Dow. It has filled a portion of its gap from that news. You could potentially trade it vs. yesterday’s low of $161.16.
We will also measure the action in some high beta names.
Apple (AAPL) couldn’t hold Tuesday’s low of $487.82 and went to as low as $481.43. Use yesterday’s low as the new pivot to trade against, as the stock is stalling in front of its 21-day which could be a buyable spot to test some longs. If it fails to hold there it could continue to lose some of its hard-earned momentum. Real resistance is now $496ish.
Google (GOOG) came into the week looking promising but has had a tough time. The first stop out for some was $895 then $881 yesterday as it couldn’t find support at the 100-day and dropped 1% to close on dead lows of $875.60. The next support level is sitting at $855.
Tesla (TSLA) didn’t give us a clean move yesterday but the stock did end up 1.60% to close on highs. A break above $186.30 on good volume could lead to another leg higher. Stock acts great with a strong trend and multiple new entries for the active participant.
Netflix (NFLX) is hovering around its 8-day as the stock didn’t get much attention yesterday. It closed around flat line with a 0.21% gain. Holding above the new support floor of $300 could be constructive moving forward.
LinkedIn (LNKD) also took a break after an igniting move up to get back above the 8- and 21-day on Tuesday. It needs to break above Tuesday’s high of $250 to get back in motion. It was upgraded today so see if it can hold its morning gap.
Facebook (FB) remains one of the strongest stocks in the market. It seems like every day it gets a new upgrade and higher target. FB was our focus for most of 2013 starting in our 2013 thesis, then on Cramer’s Mad Money, and most recently on August 20 around $38 targeting another move north of $46. Now it’s tricky. At these levels it’s hard to buy, but those trying to short it are losing. If you are long, perhaps trim and trail, and if you aren’t involved wait for more calculated opportunities. FB could tag $50+ today.
Some Chinese names continue to act well
Baidu (BIDU) has had a monster run since I went over it on theStreet.com around $105. Now it’s $150ish and still trends above the 8-day. Keep it on the radar, although it is sometimes a bit sloppy.
Sina (SINA) has been holding the $80 area and looks okay. It needs to clear $88ish to potentially generate new momentum.
SouFun (SFUN) has a tight pattern and could go again if it closes above $50.50 with volume.
Metals had a decent move higher yesterday, see it it continues.
GLD triggered for some at $127.33 on Tuesday and then at $128.20ish yesterday. in order for the gold bugs to get “very excited” it needs to clear the Fed day high of $133, which is a long way off.
TBT continues to work its way lower after breaking its technical sell area around $80.50. I do think it’s worth a hard look long around $71.50-72.50.
Trading has been a bit frustrating and tight lately. You’ve been able to buy some weakness, but if you add, you ruin the trade. Keep low gross and low net until we get some more clarity.
Disclosure: Scott Redler is long SPY, JPM, BAC.