The S&P finished last week with two strong days of gains amid hopes that Congressional leaders had agreed in principal to temporarily raise the debt ceiling. However, officials were not able to finalize an agreement over the weekend and futures are lower this morning as a result. With the dysfunctional environment right now in Washington, we warned not to count the chickens before they hatched, and our leaders are once again throwing the market a high-stakes curveball. World markets are mixed but S&P futures are down about 10 handles.
If you are looking for short-term areas to use as support, watch Friday’s low and then 1680-1685. If that area does not hold we could see more downside probing.
This week is a busy one for corporate earnings. JP Morgan (JPM) and Wells Fargo (WFM) got the ball rolling on Friday with mediocre results. JPM opened higher despite a loss, attributed to legal write-downs, but traded lower during the session, while WFC opened well lower but rallied to back near the flat line. Banks will remain in focus early this week. Besides bank, we have General Electric (GE) and Google (GOOG) among the big names reporting.
Check the temperature of the sectors
The banks enjoyed a three-day rally as the Financial Sector ETF (XLF) tacked on another 0.59% to get back above all key moving averages on Friday. This week will be an important week for this sector as some big banks are reporting earnings: Citigroup (C) and Bank of America (BAC) on Tuesday, Goldman Sachs (GS) on Thursday and Morgan Stanley (MS) on Friday.
The Consumer Staples (XLP) led the market up on Thursday and got some nice follow-through on Friday. The XLP found support at the 200-day on the recent correction, which is constructive. A break and close above the 100-day at $40.60 could keep the uptrend intact.
The Utilities (XLU) also joined the market rally last week to reclaim all key moving averages. The XLU is still forming a macro wedge pattern as it’s been lagging the market since May. During a volatile environment like this, a defensive sector like the Utes can be a safe haven that investors flock to. A break above $38.50 could help the ETF clear the downtrend resistance that has been in place since May.
The Russell 2000 soared all the way back to highs, with the Index ETF IWM enjoying 1.45% gain on Friday. A break above Friday’s high of $107.73 could open the door for new highs. Upper-level support stands at $106 area.
The metals have been tumbling, and although they are set for a higher open this morning, there is a clear downward trend in place.
Gold (GLD) dropped another 1.34% to break below the recent pivot low of $123.81. Use Friday’s low of $121.85 as the new point of reference to trade around as buyers could step in at these lower levels while markets remain heavily headline-driven.
Silver (SLV) also shed 1.5% on Friday to break below its 100-day moving average. Support 1 stands at $20.37 and Support 2 stands at $19.88 from Oct 1st lows.
Apple (AAPL) continued to find support at its 21-day and held up well last week. A break above Friday’s high of $494 could set it back in motion. Use Friday’s low of $485 as key short-term support.
Las Vegas Sands (LVS) broke out to new highs at $68.35 on Friday. Some digestion above breakout level of $67 would be healthy. Other casino stocks are also acting well. Wynn (WYNN) saw new highs on Friday after a potent two-day rally. MGM Resorts (MGM) is hovering near highs with a tight set-up. A break above $20.90 could trigger the next round of buying in MGM.
SolarCity (SCTY) soared 23% on Friday when the company offered up encouraging operating metrics and boosted its outlook for next year. Look into other solar stocks like JKS, JASO, FSLR, CSIQ as they could pick up some momentum following the igniting move in SCTY.
Schlumberger (SLB) has been building a tight upper range and looks poised for a potential breakout at $90.30. The stock has a healthy uptrend in place since its earnings gap from July.
Applied Materials (AMAT) has a tight consolidation range after the big gap up on September 24th. Use Thursday’s low of $17.45 as the upper support to trade against. A break above Friday’s high of $18 could get it going.
Disclosure: Scott Redler is long DNKN, AAPL, WDC, AAPL calls