US stock futures point to a sharply higher open Thursday morning as the government shutdown and debt ceiling negotiations show some nascent signs of progress. Conservative Republicans in Congress are warming to the idea of a short-term debt ceiling increase to avoid a calamitous default. The news is just a start, but the size of the gap shows just how hungry Wall St was for some good news.
With S&P futures up 15-16 handles, the index will be opening right at the pivot support from last Thursday that we broke below on Tuesday. The higher open will also take us right up into the downward curling 8- and 21-day EMAs, so that 1670 level on the S&P will be a get battleground between bulls and bears for short-term composure of the market.
The S&P was able to stage a small Red Dog Reversal yesterday, but the price action wasn’t all that convincing. Tech as a whole continued to show relative weakness as the Nasdaq dropped 0.44%, although there were a few Red Dog Reversal in select stocks that could lead to positive divergence from the group.
When you have major carnage in an index like we saw Tuesday in the Nasdaq, it’s important to analyze the performance of individual stocks in the subsequent sessions to try to uncover relative strength and weakness (the “haves” and the “have nots”).
Yesterday the Nasdaq finished negative, but there were sevearl tech stocks that held in relatively well and staged reversals (the “haves”).
Apple (AAPL) posted a smaller loss than the Nazzy on Tuesday, and then yesterday staged a Red Dog Reversal to keep in the game for higher prices. The stock met some buyers at $478 and closed 1.2% higher, erasing most of Tuesday’s losses. AAPL is gapping up several points this morning with the market, and the next pivot to watch would be $492.65 from Monday’s high. A break and close above this could help AAPL clear the intermediate downtrend resistance.
Lululemon (LULU) held up relatively well during the last two-day pull back as the stock continued to hold above its 8- and 21-day EMAs. Use yesterday’s high and then Tuesday’s high as potential pivot entries.
Sandisk (SNDK) met some buyers around its 21-day EMA yesterday and staged a Red Dog Reversal to finish positive. The stock also held the uptrend support that has been in place since August’s lows. Watch yesterday’s and then Tuesday’s high as short-term points of reference.
Sina (SINA) held the $79 support level and had a nice reversal bounce yesterday. The stock, like AAPL, erased most of the damage from Tuesday’s potent sell-off. SINA might need some more time to build this upper level range, but overall the stock looks good.
Tech stocks that remained weak yesterday and could be “short the bounce” type candidates. (the “have nots”)
Tesla (TSLA) is a tough one to call because it’s been so resilient this year, but when the music slows down in these speculative type names, sometimes the momentum seeps out quickly. Yesterday it showed relative weakness early in the day as sellers stepped in right off the open to push the stock down to as low as $161.50. It did see a bounce together with the market but couldn’t get through $171.50 area. TSLA is opening near yesterday’s high, so watch that as a key short-term battleground for the stock.
Amazon (AMZN) showed relative weakness yesterday as it couldn’t find many buyers at lower levels. It also is set to open near yesterday’s high, which will be a key level.
Netflix (NFLX) also got hit hard again yesterday as it broke some upper support levels, slipping another 4.6%. It still feels heavy as buyers don’t seem to be in a rush to get involved at these lower levels. The chart is broken and need time to repair, and it is also opening near yesterday’s high.
Google (GOOG) had a strong bounce off of lows of $843 yesterday and put in a doji candle, signaling some indecision. A break above yesterday’s high of $862.65 could bring in some buyers.
Facebook (FB) had a decent bounce off lows yesterday after it hit the $45.26 area, but wasn’t able to finish the Red Dog Reversal. A break and close above the 21-day at $47.45 could help it regain some power.
Gold (GLD) dropped another 1% yesterday as it remains a dog in almost any environment now. It needs to hold the recent pivot low of $123.81 to stay out of trouble, but is actually now set for a slightly higher open.
The Biotechs ETF (IBB) got hit pretty hard as the ETF put in a few ugly candles over the course of last few sessions. On a short-term basis, see how much of yesterday’s losses the ETF can re-claim.
Disclosure: Scott Redler is long AAPL, SPY