Daily Wrap
DJIA -2.99 (-0.02%) to 13,245.45; S&P 500 +0.64 (+0.04%) to 1,428.48; NASDAQ -8.49 (-0.28%) to 3,013.81;
Today we started with a gap higher which consolidated in an orderly fashion until just after noon when we had the release of the Fed data. The market broke to new highs for the day but then started to give back some of the gains around 2 and then steadily trended lower the last hour finally closing just up for the day after spending a few minutes negative. This would be a classic, buy the rumor and sell the news type action. Even sometimes after the news there will be a move but it just cannot be sustained.
It is generally easy to find the major news of the day especially when it is talked about coming up to the event, the markets move on the event and then we spend time analyzing the event and we had that today in the Fed announcement. I have generally felt the Fed and Fed statement is not really as important since it feels like they have already pulled out the “big guns” and also tried to provide transparency (some might also say consistency) in their plans to reduce the “headline” risk. Just when I think I have it all figured out they throw in a small twist. In additional to announcing the $45B in (longer term) Treasury securities each month, the Fed also targeted the Federal reserve rate to Unemployment stating the federal funds rate would remain low “as long as the unemployment rate was below 6.5%. This has been a topic of discussion in major media including Steve Liesman of CNBC but it also didn’t seem like a very likely event or at least not something the Fed might do soon. Surprise! Getting back to the purchase of longer term Treasury securities. I do find this important for the nation. We obviously need to get back to some more fiscal prudence and while the national debt is truly astonishing, I am personally more concerned with the deficit. The reason being is that you first need to stop the bleeding and that is the deficit to me. We first need to stop adding to the debt to then tackle the debt. If the cost of servicing our debt were to dramatically increase, it could be crippling and even if we had made the necessary changes to close the deficit it would cause additional taxes and cuts if we had to re-close. by the Fed purchasing and Treasury authorizing longer term securities we have a situation where the government is able to lock in low long term rates for their debt and reduce the impact of a short term rise in rates. I am not sure exactly how much Treasury has shifted the balance sheet from shorter to longer term debt but in an interview a while back Geithner (might have been with Cramer) referenced that it was happening. I certainly hope so.
Solar stocks got a bump today and while First Solar (FSLR) was up, it was some of the smaller more beaten down names that really popped like Yingly Green Energy (YGE), Trina Solar (TSL), JA Solar (JASO) and LDK Solar (LDK) which were all up somewhere between 20-30%. Why? Report out of China noting that they will spend an additional $1B to subsidize the country’s solar power companies.
Dupont (DD), while closing off the highs, closed up over 1% on an upbeat earnings report which saw Q4 estimates toward the higher end of analyst expectations. DD also noted that they plan to perform a $1B stock buyback which will be completed in 2013 as long as they receive the expected proceeds from the Performance Coatings divestiture.
There were other stocks in the news including downbeat comments from Walmart (WMT) regarding the fiscal cliff affecting holiday spending but the last one we will cover is a merger. Gilead Sciences (GILD) announced the they will be purchasing YM Biosciences (YMI) for $2.95 per share in cash which represents a near 81% increase from Tuesday close. Congrats to any YMI investors!
As always you can visit the Event’s Calendar for the release of economic data, scheduled meetings and other news that could move the market.
According to Briefing.com, the following noteworthy companies are scheduled to report earnings before tomorrow’s open: CIEN, HOV, PIR
Going forward we noted on stock twits that the MACD was starting to lag and there was negative divergence on the 1 hour chart’s RSI which seemed to be calling for a dip. We ended up getting that dip today but the market currently has a formation of higher highs and higher lows. While it is still somewhat troublesome to me that the market chose to not bottom with positive divergence and instead “V” bottomed, but it did catch many off guard and the market loves to do that. I am viewing the market as still positive and that dips are buying opportunities but I will not be playing the market itself and instead will focused on specific stocks that have good patterns and should be able to follow through with a general market not weighing them down. Ultimately I am more reactionary to market moves so I like to “see” how they retrace but there is a decent amount of support on the SPY and I would like to see price stay above the 62% fib (142.99 on SPY and roughly 1424 on the index) and definitely over the 1400 on the index. Below there and I start to questions if we are seeing a different pattern develop or a shift in sentiment.
