World markets were extremely quiet overnight with most trading just south of the flat-line, while several Asian markets were closed for holidays. Has the Fed-induced rally run out of steam already? I believe with QE you could get diminishing returns, i.e. less bang for your buck the longer it goes on. With the surprise “no taper” announcement the market once again finds itself in limbo rather than just being able to “get on with it.” We will only worry about what we can control, and will continue to obey the price action, which remains bullish.
The market also digested yesterday, consolidating some of Wednesday’s powerful breakout to new all-time highs. The S&P and Dow both finished slightly lower yesterday, but the Nasdaq posted a small gain thanks to more momentum from recent tech stand-outs. The rate-sensitive sectors and assets that ignited on the Fed announcement rested.
Overall the S&P held in well yesterday as it traded within a narrow range in the top third of Wednesday’s rally. Any additional digestion in the upper end of that range would be deemed healthy as well. Holding above 1715 would likely keep the recent momentum intact. Rest is key in order to sustain higher prices going forward, but the market has done a tremendous job of charging ahead despite overbought conditions much of the year.
Elon Musk stocks were on fire yesterday
Tesla Motors (TSLA) broke out to new highs in yesterday after getting an upgrade. The stock rallied 7.04% after triggering above our action buy price of $168 earlier in the week. This stock has seen an incredible run this year, to say the least, and has held the 21-day on almost every pull-back. Not even its own CEO saying it’s overvalued can bring it down.
SolarCity (SCTY) finished yesterday’s session up 5.58% as it triggered above the action buy price of $37.30-37.60. Stops could be placed at $34 with potential targets of $39.70 and $43.20.
Several other leading tech names got back in motion yesterday, like Pandora (P), Yelp! (YELP) and Facebook (FB), while other high-beta tech stocks digested yesterday’s gains
Google (GOOG) rested yesterday after Wednesday’s powerful move above the recent pivot high of $898. The stock needs to hold above $895 going forward to show commitment to yesterday’s move.
Netflix (NFLX) is in a tight upper level pattern that could see another move higher above $310. This stock has been trending higher this year.
Trades on the radar
First Solar (FSLR) has been beaten down lately but is basing above support of $36 and could be on the move again above $40.60-40.80 on volume to fill some of the gap from early August that starts at $42.25.
Noodles & Company (NDLS) is a recent issue that is in a tight range as it consolidates in front of a descending trendline. Look for this pattern to potentially resolve to the upside above $46.
Overall I expect a quiet options expiration Friday as world markets adjust to new price levels. Digestion is healthy. The market will always have something to obsess over, and the latest debt ceiling debate is next in the queue. Just like with every other headline we’ve gotten this year, pay more attention to price than rhetoric.
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