Daily Wrap
DJIA -129.71 (-0.93%) to 13,880.08; S&P 500 -17.46 (-1.15%) to 1,495.71; NASDAQ -47.93 (-1.51%) to 3,131.17
Today proved to be a very timely pullback as we noted last last week and then this weekend after Friday’s action that we believed a form of a top was in that would provide a longer pullback/consolidation than we have been seeing of late. Today essentially wiped out all of last week gains and it is not surprising after such a strong move down to see the markets up slightly after the close. We will have to see if they can hold or build on the near 2 point gain by tomorrow’s open. Economic data was light with only Factory Orders (came in below expectations) and frankly the whole week is light especially compared to all the news out last week.
Merger Monday was back in affect as Acme Packet (APKT) agreed to be acquired by Oracle (ORCL) for $29.25 per share which represented an over 20% premium from Friday’s closing price but also far below the all time highs reached in 2011 of around $80. There was some pin action including Sonus (SONS) and Broadsoft (BSFT) gaining over 20 and 10% respectively. BSFT looks the most interesting to me which could be breaking out of a longer consolidation pattern bu even SONS could be making a move off a long term base. Communication Equipment might be the next area to watch.
Moving higher today while the market dropped was Netflix (NFLX) which was up to the tun of near 10 points or 6%. I didn’t see any specific news although there was a random price target raise to $165 at BMO Capital. Also yesterday there was comments out by the CEO noting he felt we are on the cusp of something that will change television forever, namely internet TV will become more prominent. I personally have resisted the Netflix subscription but I know many that have not and love it.
Also moving higher today was Caesar’s Entertainment (CZR) (I forgot they went public in 2012) on an announcement that the company will be looking to transfer growth related assets into a separate entity. Investors like break-ups especially when they believe a conglomerate of sorts has old or less “sexy” assets that weight down the higher growth potential products. By divesting the growth from the more “stable” operations you can obtain more value due to different market multiples. CZR is well below its high of $18ish and coming off a divergent low, this is a name to watch.
Last name for tonight is Moody’s (MCO) which was down over 10% in sympathy for its peer S&P who is not facing a civil lawsuit from the DoJ stemming from ratings done prior to the financial crisis. MCO has not been named in any such case themselves but clearly the market was worried and frankly MCO has also been a on tear and had decent negative MACD divergence so technical traders might have been willing to pile on short driving it lower. Also on stocks with charts like this you will sometimes have stops just below as people trail their winners up and on a hard move they can start to trigger like dominos. I would personally have to see MCO much lower ($40 range) to start to become interested in the name.
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: AGN, ADM, ADP, BDX, CAH, CSC, DLPH, DO, ETN, EMR, EL, K, NYX, SE, TE
Back to the markets and that fact that we got the a pullback as expected but now do we see more downside or are we in a buy every single down day for a bounce back? While we could bounce some tomorrow and as I write the futures are up just a bit, think this is what I was noting this weekend as a more significant top than what we have been seeing recently and that we have a much more substantial correction/consolidation than the ones of late which could be counted almost by hours. I will be watching the 20 day SMA, then the 1475 previous breakout level and lastly the 50 day SMA as support/reaction levels to get a better gauge on what the markets might do.
