World markets are mixed as everyone tries to make sense of Friday’s US jobs data and its implications for future monetary policy. Europe is up small, the Nikkei up small and Shanghai is flattish. The jobs report was a double dose of bad news, as not only did the US economy create only 74,000 jobs in December, but we saw a mass exodus from the labor force that sent the unemployment rate down to 6.7%. Labor force participation is now at a 36-year low.
Anyway, there is not much we can do about the Fed or what goes on in Washington. We can only control our process and measure the composure of the markets on many timeframes. This week really kicks off earnings week. Now we get to see how corporate America is doing just as a Goldman Sachs analyst says the S&P is overvalued on most metrics. It should be an interesting few sessions/weeks.
This week is heavy on bank earnings: JPM/WFC Tues morning 1/14, BAC Wed morning 1/15, BBT/C/GS/HBAN/PNC Thurs morning 1/16, AXP/COF Thurs night 1/16, and BK/CMA/MS/STI Fri morning 1/17. In tech, LLTC kicks things off Tues night but the big focus will be on INTC (Thurs night). Brightening PC outlook for 2014 has some people more optimistic about INTC earnings. In addition to banks and tech, the other big reports scheduled during the week of 1/13 are Michael Page/SABMiller (Tues morning 1/14), Burberry (Wed morning 1/15), Carrefour/Rio Tinto/UNH (Thurs morning 1/16) and GE/SLB (Fri morning 1/17). Earnings season will get even busier during the week of 1/20.
S&P futures are down 5-6 handles this morning as so far we’ve absorbed a big 4th quarter move from 2013 on top of a lofty gains for that year. The question is, which way does this range resolve? We have support at 1832 and then the 2014 lows of 1823. Pivot resistance is 1843-1849.
In today’s Morning Call we will check the temperature of some key sectors.
The Nasdaq ETF (QQQ) continues to grind higher above its 21-day EMA with accelerated uptrend support since October staying intact. The longer it stays above the 21-day EMA, the higher the probability we could see the next breakout above $87.96.
The Financial Sector ETF (XLF) has been holding higher above its 8-day EMA. The ETF looks poised to make a new high above $22.10. Upper support stands at $21.90. Below that we have the 21-day EMA at $21.70ish. Bank earnings this week could play a part in determining the direction of the next leg in the market.
The Homebuilders ETF (XHB) found some support at its 21-day EMA to contain the recent sell off. After a controlled pull-back, getting back above $33-33.15 could get it back in motion for higher prices. They perked up as rates backed off a bit.
The Biotech ETF (IBB) had a strong three-day rally largely due to Intercept Pharmaceuticals’ (ICPT) impressive gains of almost 500% in two days. The ETF looks a bit extended from its short-term EMAs, though, and ICPT is down around 30% this morning. Some consolidation above $230-232 would be healthy to keep its momentum intact.
The Consumer Staples ETF (XLP) has been lagging the market as the ETF continued to slide off of highs since mid -December to put in a series of lower highs. It needs to get back above $43 to get some traction to the upside. Intermediate support stands at $42.
The Agribusiness ETF (MOO) has been waking up a bit lately. It lagged in 2013 but looks like it might be a good vehicle in 2014. It need to clear $54.50 with authority to get more attention here.
High beta tech continues to be mixed with a bit of random action.
Apple (AAPL) has been frustrating since announcing the China Mobile deal. We’ve had a few spots to navigate, and most recently it couldn’t hold that gap at $562 then broke below $551. On January 6th it looked like it would try and get some footing around $540 and then got pressured again. Taking this day by day, Friday’s low was $531.11 with bigger support at $527 then $517.
GOOG found some support at the 8-day EMA after a three-day pull back. Use Friday’s low of $1122.25 as the new pivot to trade against as it starts to look more interesting after a controlled pull-back after a new high. Overall, GOOG has continued to be a market leader to stay with.
Amazon (AMZN) lost some steam after its new high at $406.89. The stock found some support at its 8-day ema on Friday. Use Friday’s low of $393.80 as the pivot level to trade around as the stock hasn’t breached its 21-day EMA for the last three months.
Netflix (NFLX) changed composure on 12/27 when it broke its accelerated trend-line and hasn’t been the same since. You always need to measure momentum names closely. Now it’s at the 100-day – see if there are any opportunities around Friday’s low of $330.53.
Baidu (BIDU) trends higher but trades very sloppy. It’s still following its 8-day but hard to get day to day momentum. Trade smaller timeframes here, or much bigger ones.
Social media continues to be an active spot.
Facebook (FB) still acts best hovering near highs. The longer it holds $56.65 the higher the probability the next time it goes for highs, it could clear $58.30 then $58.96.
Yelp! (YELP) had a nice breakout since closing above $70ish. Trim and trail and congrats if you’re still in it from Off the Charts as it already met our targets.
Twitter (TWTR) is trying to stabilize above $55.60ish. It was upgraded by GS today, needs to clear $58.76 and hold above it to help get some momentum back. Next resistance would be $60.84.
LinkedIn (LNKD) has had a very nice move since the Red Dog Reversal at $202.55. Now it’s almost $220ish. This spot might be a bit tough to get through.
3-D printing names still act well.
3-D Systems (DDD) is hugging the 8-day EMA. Use that as the trend to follow.
Stratasys (SSYS) is also hugging the 8-day and looks good if it wants to stay strong. Just remember when things change, make adjustments.
Voxeljet (VJET) is getting tight and I like the setup. If it can get above $45ish perhaps it could get going again.
ExOne (XONE) is acting better with an important level at $68ish. Organovo (ONVO) still hangs in and needs to clear $11.75 to get more interesting.
Some mega caps look a little better.
Microsoft (MSFT) is coming out with Windows 9, it would be nice if $35.40 is the new pivot low for 2014.
Cisco (CSCO) has a tight set-up, above $22.41 and it could get some action above this bull flag set-up.
Intel (INTC) reversed on Friday, and needs to hold $25.25 to stay interesting at all. Earnings will be key this week.
Sony (SNE) needs to hold $17.45 to stay on the radar.
The 2x Inverse Bond ETF (TBT) got hit pretty hard on the surprising jobs data. Your new pivot is $75.11.
Gold (GLD) had a decent move to start 2014. In order to stay interesting, it needs to hold Friday’s gap at $119.58. Next resistance is $122.32.
There’s been a lot to do in some individual names so far this year. The trade has felt a bit thin with air pockets in both directions. We have a range to navigate if things change. I took some risk down as last week was a bit tricky. Let’s see how we handle earnings season.
Disclosure: Scott Redler is long BAC, MSFT, SNE.