Before the Open (Jul 21)

Posted on by Jason Leavitt

Good morning from LA, where I’ll be for the next week. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets closed mixed. Indonesia led with a 0.8% gain followed by Taiwan (up 0.4%) and New Zealand (up 0.35%). Hong Kong dropped 0.3%. Japan was closed for a holiday. Europe is currently mostly down. Russia is down 2.2%, Greece and Italy 1.4%, Germany 0.9% and France 0.6%. Futures here in the States point towards a down open for the cash market.

The dollar is up. Oil is down, copper up. Gold and silver are up.
After a couple weeks of low quality and quantity set ups to play, lagging breadth indicators and under-performing small caps, the market looked like it was finally going to break down last Thursday when it suffered its biggest down day in several months. But everything reversed Friday, and all Thursday’s losses were recaptured. Instead of heading into the weekend with the bears firmly in control, the bulls showed up to remind everyone they’ve been in control for much of the last five years, and they weren’t about to go down without a fight.
So we enter the new week with just as many short term questions as we have the last two weeks.
Set ups improved at the end of last week.
Some indicators would be supportive of a rally while others need a more extreme move to suggest a complete washout.
Earnings season picks up…10 of the S&P 500 report today.
And tensions in Eastern Europe have not subsided.
I like the market over the long haul and believe new highs will be made as long as something major doesn’t happen in the world.
But in the short term, for reasons outside the charts, the market is totally unpredictable day to day, so I wouldn’t be super aggressive here. There are a lot of cross currents and not a lot of reasons to have a strong opinion here. Be conservative. More after the open.
Stock headlines from barchart.com…
Two S&P 500 companies this morning reported above-consensus earnings: SunTrust Banks (STI +1.66%) ($0.81 vs consensus of $0.77), and Hasbro (HAS +0.55%) (0.36 vs consensus of 0.356). Two S&P 500 companies also reported below-consensus earnings: BB&T (BBT +1.59%) (0.70 vs the consensus of 0.75), and Halliburton (HAL +0.82%) (0.91 vs consensus of 0.912).
Steel Dynamics (STLD +1.25%) announced an agreement to acquire Severstal Columbus for $1.63 billion. Meanwhile, AK Steel (AKS +4.00%) announced an agreement to acquire Severstal Dearborn for $700 million in cash.
Lululemon (LULU +0.45%) filed a lawsuit against “knockoff artists,” according to The Globe and Mail.
Third Point reported a 19.3% stake in Biofuel Energy (BIOF +24.54%).
Gabelli reported a 19.56% stake in Internap (INAP +0.75%).
Earnings and Economic Numbers from seekingalpha.com…
Today’s economic calendar:
8:30 Chicago Fed National Activity Index
Notable earnings before today’s open: AGN, BBT, GPC, HAL, HAS, LII, MAN, NVR, PETS, PHG, SIX, STI, XRS
Notable earnings after today’s close: BRO, BXS, CCK, CDNS, CMG, CNI, CROX, CYS, ELS, GLF, HLX, HSTM, HXL, NFLX, PKG, POL, RCII, RMBS, SANM, STLD, TXN, UCTT, WCN, WWD, ZION
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Jul 21)”

  1. Another flagpole rally Friday which broke all obvious resistance and recovered most/all of Thursday’s losses,depending which index you follow. For the SPX, it was “most.”
    Was it to recover what amounts to a knee-jerk reaction to Thursday’s world news?
    To be honest, I don’t recognize what level they bounced it at on Friday (futures).
    What I can say is that they bounced it above a support level at 1954-ish which they had already bounced from on Jul 10.
    Therefore, based on that, Tgt is 1998 AS LONG AS 1947 holds.
    Overnight, we’ve come down from Friday’s close, and they need to hold a couple of levels:
    First 1970-1968.
    If that fails, 1964-1958. Bulls don’t want to see 1958 break, it would be the canary / coal mine.
    There is resistance 1974-1977.
    Futures negative all night, low of -8. – 7 at 905.

    2. dbl bottom and 200ma support on the 30m chart for dia…lookin for a test on the upper fork..spx could form an invert h & s…low % move though.

      1. Resistance is lowered as a result of lower low. Starts at 1971.50, runs up thru 1974-75 now. If bulls able to break > 1975, there should be (not mandatory) a pullback to about 1968 from where it should bounce. Bonds and BKX both are bearish. Need one of them, preferably both, to be in bullish-sync for a bounce to hold.

          1. good call, if this falls like I expect it to, watch for reaction around 1968-9. There is support at 1972ish, so may not get down to 68-9.
            Bonds, BKX still bearish but improved.

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