Before the Open (Jul 10)

Posted on by Jason Leavitt

Good morning. Happy Thursday.
The Asian/Pacific market closed with a lean to the upside. Indonesia led with a 1.5% gain followed by Taiwan (up 0.8%). Japan dropped the most (down 0.6%). Europe is posting stiff, across-the-board losses. Spain, Italy, Austria, Amsterdam, Norway and Greece are down more than 2%; Belgium, Stockholm, Switzerland, Prague, Russia, London, France and Germany are down more than 1%. Futures here in the States point towards a huge gap down open for the cash market (S&P futures are down 21).

The dollar is up. Oil and copper are down. Gold and silver are up.
The market sold off with some intensity on Monday and Tuesday and then bounced yesterday. Today the market is set to fall hard…at least at the opening bell. Renewed concerns about some of the EU’s financially weakest members has resurfaced. Portuguese bonds got crushed on concerns debt payments may be missed by a company linked to the country’s second largest bank. With this news, memory of Greece, Spain and Italy quickly surface and the reality that the European economy isn’t as nearly as strong as the US economy, which is only do pretty good.
I’ve been laying low the last week, wanting to see what shakes out. It’s unknown whether the recent weakness is the beginning a legit pullback or just another minor dip within a long extended uptrend. Plus with leaving Costa Rica in two days, I have a lot of loose ends to tie up, so I’ve been more of a spectator than a participant.
Perhaps the news from Portugal will blow over. Perhaps it’s a canary in a coal mine. We’ll see. For now I’m still laying low and not interested in doing much in the near term.
Stock headlines from barchart.com…
Family Dollar Stores (FDO -0.22%) reported Q3 EPS of 85 cents, below consensus of 89 cents.
UnitedHealth (UNH +0.99%) was downgraded to ‘Hold’ from ‘Buy’ at Jefferies.
Starwood (HOT +1.90%) was upgraded to ‘Buy’ from ‘Hold’ at MLV & Co.
Allscripts (MDRX -0.39%) was upgraded to ‘Strong Buy’ from ‘Buy’ at ISI Group.
Alcoa (AA +5.66%) was upgraded to ‘Overweight’ from ‘Equal Weight’ at Morgan Stanley.
Billionare activist investor Carl Icahn reported a 9.98% stake in Seventy Seven Energy (SSE -2.30%) .
PrivateBancorp (PVTB -0.82%) and MB Financial (MBFI -0.49%) were both upgraded to ‘Buy’ from ‘Neutral’ at Sterne Agee.
Lumber Liquidators (LL -8.06%) slumped 16% in after-hours trading after it cut guidance on fiscal 2014 EPS view to $2.65-$3.00 from $3.25-$3.60, well below consensus of $3.34.
Republic Airways (RJET -1.87%) raised guidance on Q2 EPS view to 35 cents-40 cents from 30 cents-35 cents, above consensus of 34 cents.
Potbelly (PBPB -2.92%) sank 18% in after-hours trading after it lowered guidance on Q2 adjusted EPS to approximately 6 cents, only half of consensus of 12 cents, and then lowered guidance on fiscal 2014 adjusted EPS to 18 cents-21 cents, well below consensus of 34 cents.
Ruta Zandman reported a 7.6% stake in Vishay (VSH +0.26%) .
Earnings and Economic Numbers from seekingalpha.com…
Today’s economic calendar:
Chain Store Sales
8:30 Initial Jobless Claims
10:00 Wholesale Trade
10:30 EIA Natural Gas Inventory
1:00 PM Results of $13B, 30-Year Note Auction
1:15 PM Fed’s George: Monetary Policy
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Notable earnings before today’s open: FDO, PGR
Notable earnings after today’s close: CUDA, EOPN, PSMT, VOXX
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Jul 10)”

  1. I wrote this about an hour ago but it still is valid 30 mins into trading:
    Obviously we’re in for the “move opposite” the Fed Minutes release. After traders read the minutes, they find those hidden nuggets from the Fed. I’m hearing there are also concerns over “Portugal bank woes.”
    The climb after the 2 pm report Wed was less than stellar, and you’ll note they did not make it above the 1975 I posted yesterday. Resistance there was extremely stubborn, and this is the result.
    In any case, this is what we have, so how now to deal with it.
    If they hold the low in the futures that they are making around 9, expect an eventual move back up to 1962 thru 1966. Be patient, could take all day. That will cause hopeful bulls to think that the danger has passed. If that area of resistance holds, and I think it will, we’ll turn lower and target 1945. There is one last major area of support just below that at 1941, which is 10 points wide. When we get there, I’ll update.
    If they take it lower than that low, the area of resistance at 1962 will move down correspondingly.
    If, and this is low odds in my estimation, we break thru 1966 on the upside, expect a minor pullback and a move higher.
    Based on what I see now, this might be a case for buying the open — but plan to make a quick $ and don’t stay married to it.
    At their low of the night, futures were -22 and that was at 9 am. Now -18.00

      1. I went short at 12:39 eastern. Exited at 12:59 since Indicators went bullish. Made a few $. Clearly they didn’t make the full retracement which woulda been nicer.

    1. Had a passing Thunderstorm and knocked out internet for a while.
      You may be very right. Since they trampled that last 61.8 line, they seemed to have run up to a resistance layer from 1968 thru 1972 to get short. Am sure you see it. All time high to most recent low.
      There is a mild support level at 1961 down to 1958. Either they bounce it there, or if that fails, I expect they’re targeting 1943-44.

        1. rog. While I was short I kept getting the feeling that there was a bid under the market. Every time it dropped, it bounced back.
          BTW, bonds today have been bullish [for stocks] whereas yesterday all afternoon bonds were bearish. Did they know the news sooner? Just saying, bonds were sending a contrary signal Wed and today, so keep close watch.

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