Several Asian markets suffered heavy losses overnight, with the Nikkei dropping 2.75% and the Shanghai composite falling nearly 1.5%. However, European markets and US futures have so far been able to shrug off that weakness to trade slightly north of the flat line.
Overall US markets are trying to work off their overbought condition with a little sideways digestion. Yesterday we rebounded from Wednesday’s drop, but futures indicate we could get somewhat quiet action today.
I wouldn’t have excessive short on the brain unless the S&P breaks and closes below 1740-1745, then the real prior pivot is 1729. Resistance stands at 1759.
Earnings season rumbles on and so far the results have been generally positive in most names we follow closely. Last night, Microsoft (MSFT), Amazon (AMZN) and Zynga (ZNGA) were the latest to report better-than-expected results and trade. While MSFT and ZNGA are lower-level patterns, AMZN is set to open up nearly 8% at new all-time highs just shy of $360 as its ascent continues. Apple (AAPL) and Exxon-Mobil (XOM) report earnings on Monday.
The rally has become more narrow, so make sure you are that much more selective moving forward. There nothing wrong with lacking in gains and although the averages are holding higher, the market has been flashing some minor caution signs. So far it hasn’t been enough to warrant having excessive short on the brain, but I think we should all remain on our toes.
News also hit this morning that Twitter is going to price its IPO “modestly” at $11 billion. I think they are wary of getting their public life off on the wrong foot the way Facebook (FB) did, and would rather not try to squeeze every penny out of the IPO. Rather, they are going to let the market determine fair value, which I think is positive and doesn’t put retail investors in such a precarious position from the outset.
Disclosure: Scott Redler is long AAPL, FB, ZNGA calls, XHB, GOOG. Short ZNGA, SPY