Before the Open (Apr 7)

Posted on by Jason Leavitt

Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets closed mostly down. Indonesia did well; Japan, New Zealand, Singapore and Hong Kong led to the downside. Europe is currently down across the board. Russia is down 3%; Germany, London, France, Norway, Switzerland and Prague are also down a bunch. Futures here in the States point towards a moderate gap down open for the cash market.

The dollar is down. Oil and copper are down. Gold and silver are down.
A month of divergences and warnings seems to have finally caught up with the market.
Money has been rotating from speculative small caps and tech stocks into well-established large caps.
It’s been coming out of growth stocks and going into value plays.
It’s been coming out of the Nas and going into the NYSE.
Many leading stocks have stopped leading.
Many leading groups are now under performing.
Many breadth indicators have divergence from the underlying price action.
The market tried its best to hold up, but the sum total of the weight of all the above seems to have finally been the proverbial straw that broke the camel’s back.
The path of least resistance is now down.
April tends to be a decent month for the market (“sell in May” doesn’t start until May), but ignore those types of historical stats…unless you plan on executing a certain set up for the next 50 years.
The market has V bottomed numerous times the last few years, so it’s always possible…especially with the Fed still somewhat in control (they could halt the tapering process or recommit to keeping rates low beyond next year).
Unless something happens to change the technicals, the path of least resistance is down. More after the open.
Stock headlines from barchart.com…
C.R. Bard (BCR -0.07%) was downgraded to ‘Neutral’ from ‘Buy’ at BofA/Merrill.
Netflix (NFLX -4.90%) was upgraded to ‘Outperform’ from ‘Perform’ at Oppenheimer.
Questcor (QCOR -5.96%) was acquired by Mallinckrodt (MNK +0.05%) for $5.6 billion.
Under Armour (UA -7.39%) was upgraded to ‘Buy’ from ‘Neutral’ at Sterne Agee.
Alcoa (AA -0.86%) and Newmont Mining (NEM +0.04%) were boths upgraded to ‘Hold’ from ‘Sell’ at Deutsche Bank.
Analog Devices (ADI -1.96%) was upgraded to ‘Neutral’ from ‘Sell’ at Goldman.
Mattel (MAT -1.23%) was downgraded to ‘Underperform’ from ‘Market Perform’ at BMO Capital.
Intel (INTC -0.95%) was upgraded to ‘Outperform’ from ‘Sector Perform’ at Pacific Crest.
PBF Energy (PBF -0.87%) was upgraded to ‘Buy’ from ‘Neutral’ at Citigroup.
Statoil (STO +0.54%) was downgraded to ‘Sell’ from ‘Neutral’ at Goldman Sachs.
Blackstone (BX -2.26%) will acquire Gates Global for $5.4 billion.
SAC Capital lowered its passive stake in Diamond Foods (DMND -3.07%) to 4.0% from 9.0%.
Earnings and Economic Numbers from seekingalpha.com…
Today’s economic calendar:
8:30 Gallup US Consumer Spending
11:45 Fed’s Bullard: U.S. Economy and Monetary Policy
12:30 TD Ameritrade IMX
3:00 PM Consumer Credit
Notable earnings before today’s open: none
Notable earnings after today’s close: none
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Apr 7)”

  1. Jason, FYI, no email today — 3 trading days in a row.
    First a word about Friday. At the payroll report, the futures went exactly to a Long target. Then they played it according to plan (see my post Friday): gapped up, approached 1900 (1897.25), then sold off. And sold off big, down to 1863.3.
    Makes the staunchest supporter of what the administration says is so, wonder if it is so. That was a humongous sell off. 34 SPX points. Did traders look at the “under the hood numbers” and realize that this jobs number is an illusion? Whatever the answer to that question, traders were having none of it. If you look at a 15 minute chart of Friday, it is a classic “waterfall decline.”
    Today: If Fri’s low is broken, expect to work down to the support level that we saw on Thurs, Mar 27, at 1842.
    Bulls have to conquer 1866 before they can claim to have the upper hand. Plenty more resistance levels above that line, too.
    The target 1909 is still valid. If we get down to 1842, it will all depend on what the reaction is there.

    1. I might not be able to post tomorrow, so will give you this update now.
      We reacted bullishly to the 1842 level. It is possible that we revisit that level Tuesday. If so, we need to remain above 1829-1830.
      On deck for Wed afternoon, 2 PM: FOMC Meeting Minutes. Could create fireworks. As usual, depends on what’s said and how they’re interpreted.

  2. My models tell me that we do not have far to fall. Further long term indicators such as a steep yield curve, low inflation, reasonable PE ratios, and others all tell me that the up trend will continue.
    Still I do not like what I am seeing as far as price action and the market “feels weak”.
    Watch the PC ratio. If it goes way over 1 go long or be wrong.

Leave a Reply