LULU warns and market dives
Index & Sector performance 1/13/14
The Market:
The S&P 500 meandered throughout the Sunday evening session, into Monday and even to start the trading day but then around noon EST weakness started to set in and continued to build. Around 2:30 pm EST we had reached R2 support in the future but we posted at StockTwits that this support did not look like it would hold due to the MACD’s formation. That support was indeed lost and the S&P 500 futures (ES) lost another 10 points to the day’s lows and 5 points to the close overall netting a 20+ down day in the S&P 500 index.
Economic data was light today as only the Federal Budget Balance was reported and came in better than expected. Tomorrow will be a much more active day with Retail sales pre-market and some Fed speak later in the day.
Economic Calendar week of 1/13/14
In the News:
Merger Monday is in effect as Beam (BEAM) closed 24.56% higher after agreeing to be acquired by Suntory for $83.50 per share.
Lululemon (LULU) which reported Q3 EPS on 12/12/13 came out lowering its Q4 guidance based on weak store traffic. Originally LULU was expecting flat same-store-sales but now expects numbers to come in slightly negative. LULU closed down 16.61% on the day.
Also moving lower in the retail sector today was Target (TGT) which closed down 1.79% as the company is still trying to repair its image with customers after the recent data breach. Interesting note for traders, TGT left a gap at $58.82 on 1/2/13 and if reached that is an area we will be watching for a potential long opportunity.
Scripps Networks Interactive (SNI) closed near 7% lower after a Wall Street Journal article stated talks between SNI and Discovery Communications (DISCA) have ended.
On the upside, Juniper Networks (JNPR) gained 7.56% on activist shareholder comments regarding the unlocking of shareholder value.
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: WFC, JPM, WAFD, LEDS
Analyst Comments:
Upgrades 1/13/14
Downgrades 1/13/14
Initiations 1/13/14
Price Target Changes 1/13/14
The Game Plan:
The S&P 500 is now reaching the initial support range we have been looking for. This itself isn’t a buy signal or territory but is a level to watch for the market to firm and try and lift (emphasis will be on the intraday charts). That lift will be telling as to where we might be heading thereafter.
Otherwise to add context to today’s move we put a few more lines on the chart this evening and added a couple highlighted boxes. Our apologies for the clutter. The yellowish box represents if the S&P 500 were to retrace 3 – 5% off the recent highs of $1849.44. The Blue box 5 – 7.5% and lastly the green box 7.5 – 10%. The point is to make sure we are taking days like today in context. It was a strong down day and one we have been looking for and in our opinion was needed but by many metrics the trend is still higher. Could this be the beginning of a much longer broader decline? Possibly, but the Bears must put together more than a one or two day drop.
Right now we are leaning toward the market having a neutral to upward bias into the Spring where then we see a decline of larger and longer magnitude. If this earnings season is weak then that expectation could be pulled forward.
