Daily Wrap
DJIA +38.16 (+0.27%) to 14,127.82; S&P 500 +7.00 (+0.46%) to 1,525.20; NASDAQ +12.29 (+0.39%) to 3,182.03
Today started on a down note but landed the S&P 500 right into its 20 day SMA which it promptly held and started to make its ascent for the remainder of the day. We had no noteworthy economic news today and frankly not much is really on tap tomorrow. The market will be left to its own devices and whether or not it can continue to press higher. I will have more below but the futures chart is trying to build a case to argue for higher levels.
The stock of the day might actually have been the stock of the weekend after reporting earnings that beat the street except for falling a little light on revenue. Transocean (RIG) initially saw the stock gap up toward the 20 day SMA (and an upside gap) which acted as initial resistance and sent RIG moving in the opposite direction of the market in generally closing near its lows for the day. RIG closed with some positive divergence on the 5 min chart which might be able to provide a positive trading catalyst for tomorrow. If someone was looking to get into this name I would personally be using a stop at or below $49.10. The Financial Times reported RIG set a dividend of $2.24 per share to be paid out over time from June 2013 to March 2014 but later in the day Carl Icahn came out stating the dividend is “too little too late” and is pushing for a $4 dividend and guess what, yes a director shake-up.
Seems like there have been a lot of mergers or merger proposals in the news lately and today we had another. Ferro Corporation (FOE) closed up over 30% on news that A. Schulman (SHLM) offered to acquire FOE shares for $6.50 per share which was rejected. SHLM is still interested and would like to see FOE come to the table which could result in an increased offer. I didn’t see a further response from FOE.
Cliffs Natural (CLF) was again taken to the wood shed today. The news today affected other mining stocks as the Chinese government came out expressing their desire, need and plan to slow the housing market. Also out today was a separate report by Bloomberg highlighting China’s efforts in creating their own mining companies to compete with the current global conglomerates. CLF got the worst but there were other names that lost on the news like Joy Global (JOY), Vale (VALE), Rio Tinto (RIO) and BHP Billiton (BHP).
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: CKP, CEP, HEES, BKR
The markets showed themselves to be resilient after the dreaded sequester news and even an early attempt by the Bears to take the market down. The 3 hour S&P 500 emini futures chart now has the potential for an inverse head & shoulders which would count higher. Otherwise the daily is doing what I expected and posted this weekend. The difference is I didn’t see the break coming this week. I felt we likely tested the upper and lower ranges this week but then looked back and remained within the upper and lower boundaries set. Tomorrow should be telling if that idea is correct but even if it is wrong, no I will not be buying the breakout for the reasons I have outlined. What I might look to do is trade along with the market using an intraday chart (3-5 min) and trade a stock of the day that has positive news and can ride the wave but that would be it and I would be out at the close.
