Week in Review
DJIA -0.08 (0.00%) to 14,865.06; S&P 500 -4.52 (-0.28%) to 1,588.85; NASDAQ -2.59 (-0.09%) to 2,856.48
Friday started with a small gap down that wasn’t greeted with the usual snap up buying and this helped lay the ground work for an early morning swoon taking the S&P 500 down over 10 points from Thursday’s close. Right around 11am EST the S&P bottomed and for the remainder of the day was able to grind higher leaving a relatively small loss for the day (the Dow nearly closed positive). This type of action is not uncommon at stretched levels as well as when there is price discovery going on. The market is trying to decide/test if these are true levels before moving to higher levels. Monday should be more telling, especially if we can retest Friday’s lows and see if they hold or break.
Along with the markets moving lower was also commodities including Gold losing the $1500 level. While I am not ready to call a bottom in Silver or Gold at this point, it is often the case that the breaking of a key technical support or psychological level can shake out the final bulls and provide a bottom. If someone was looking to take a trade in the commodity market I would focus more on Silver than Gold as I feel it has more potential to the upside.
Over the years the idea that Alcoa (AA) kicks of earnings season has declined and this year it seemed many were waiting for the banks to report. Friday provided the first two big names to report in JP Morgan (JPM) and Wells Fargo (WFC) and while neither knocked the cover off the ball, they both closed only slightly lower for the day, 0.61% and 0.80% respectively. Just to step back and review, factoring in Friday’s losses, WFC is still up 9.63% and JPM up 12.93% year to date.
In analyst notes Friday, Home Depot (HD) received an upgrade to Buy with an $85 price target at Jefferies. HD is already up nearly 20% for the year and if it reached the $85 price target that would represent another roughly 15% gain. Another big name receiving an upgrade was CSX (CSX) which was upgraded to Outperform at FBR Capital with a $30 price target. There were also many big names receiving downgrades Friday, although many of the notes were also on simply valuation as opposed to a negative view of the business. Some included Mastercard (MA), Visa (V), Coca-Cola (KO) and Microsoft (MSFT). Some of these and other upgrades and downgrades for the day can be found each morning when I post my 9 @ 9 in the Upgrades/Downgrades section.
Week in Review:
Monday the broad market bounced back after Friday’s drop on the jobs number. Monday started with a merger, specifically, General Electric (GE) taking over Lufkin (LUFK) for $3.3B or $88.50 per share in cash. As I noted in Monday’s end of day wrap, this represented an over 37% premium from Friday’s closing price. Also in the news was Advanced Micro Devices (AMD), after MSFT announced they will be using an AMD chip in the new xBox. Another big name stock in the news was lululemon (LULU) after Thornburg capital reported a 10.1% passive stake in LULU’s shares.
Tuesday the markets mainly consolidated (with a slightly higher tone) after Monday’s rise. Herbalife (HLF) was halted on news which ended up being the announcement of impropriety on the part of a KPMG partner. While the news reflected no wrong doing on HLF’s part, the shares still closed lower. First Solar (FSLR) gained over 45% after reporting earnings that beat estimates and provided guidance out to 2015.
The day before the jobs report the markets ripped leaving the S&P 500 a full 1.22% higher Wednesday. CarMax (KMX) gaped higher after beating EPS estimates and Titan Machinery (TITN) lost roughly 14% on a disappointing EPS report. Wall Street Journal reported a potential agreement between Yahoo (YHOO) and Apple (AAPL) where YHOO’s presence would be greater in the AAPL OS.
After Wednesday’s strong move the markets again somewhat consolidated, albeit with an upward bias, after a better than expected Unemployment claims number (346K vs 362K estimate). The NASDAQ actually closed down after some big tech names moved lower today on research that PC sales might be down double digits including Microsoft (MSFT), Intel (INTC) and Hewlett-Packard (HPQ).
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.
Major averages 5 day results:
Dow Jones Industrial:
S&P 500:
Nasdaq:
It will be interesting to see how the S&P reacts after Friday’s action with the early day sell off and then rally to close the day slightly lower and the week much higher. A 60 minute chart I have previously shown on Stocktwits (WSConsensus) shows a potential inverse Head & Shoulders pattern which could to roughly $1605 in the S&P 500 cash index. On the upside I will be watching the recent all time highs of $1597.35 and on the downside Friday’s low of $1579.97. Any breach should provide the market’s short term bias and I also wouldn’t rule out a potential short term tight consolidation inside that near 18 point range.
