Before the Open (Aug 25)

Posted on by Jason Leavitt

Good morning. Happy Monday. Hope you had a good weekend.
The Asian/Pacific markets closed mixed, but there weren’t any big movers. Japan did relatively well (up 0.5%); China and Malaysia dropped around 0.5%. Europe is currently posting solid, across-the-board gains. Germany, France, Italy and Spain are up more than 1%; Austria, Amsterdam and Prague are also doing well. Futures here in the States point towards a moderate gap up open for the cash market.

The dollar is up. Oil and copper are up. Gold is down a little, silver up a little.
Last week we got a solid week of gains and some high prints from some indicators (AD line, AD volume line), but several indicators are still lagging (new highs, bullish percent). Plus the small caps are lagging big time – the large caps and Nas are at new highs, the Russell is not close. I continue to like the upside, but I don’t love it due to the extent of the vertical move the last three weeks and the divergences just mentioned.
Another cause for concern is the lack of quality set-ups. Typically when the market is strong, I have a hard time narrowing the list to a workable number. Today, despite the Nas and SPX being at new highs, I don’t see very many good set-ups to trade. There’s a few, but the low number makes me wonder why more stocks aren’t participating.
I saw many sources pinpoint Yellen’s speech as a turning point. When that happens, when an opinion gains momentum and becomes the consensus, it never happens when expected. Even if the speech is to act as a turning point, the turn won’t come for a couple extra days – just long enough frustrate the believers.
I’ve been very clear in this morning right up the last three weeks that my bias was to the upside. It remains there, but I’m backing off a little. The risk/rewards isn’t there any more, and I’m a little concerned with the lack of participation. More after the open.
Stock headlines from barchart.com…
Burger King Worldwide (BKW +1.01%) is up over 5% in pre-market trading after saying it is in talks to acquire Tim Hortons Inc.
Texas Roadhouse (TXRH +1.12%) was upgraded to ‘Overweight’ from ‘Equal Weight’ at Stephens.
Foot Locker (FL +2.95%) was downgraded to ‘Neutral’ from ‘Overweight’ at Piper Jaffray.
Boeing (BA -0.03%) announced an order by BOC Aviation for 82 airplanes worth $8.8 billion.
CBOE Holdings (CBOE +0.10%) was upgraded to ‘Outperform’ from ‘Market Perform’ at Raymond James.
U.S. Steel (X +2.66%) was upgraded to ‘Outperform’ from ‘Underperform’ at Credit Suisse.
Goldman Sachs (GS +0.18%) announced an agreement with FHFA to repurchase $3.15 billion in residential mortgage-backed securities, or RMBS, purchased by Fannie Mae and Freddie Mac over the 2005-2007 period to resolve all federal and state securities law claims brought by FHFA with respect to RMBS.
Zilkha Investments reported a 5.38% passive stake in Higher One (ONE -1.99%) .
JAT Capital reported a 6.73% stake in Madison Square Garden (MSG +2.28%) .
OrbiMed Advisors reported an 11.1% stake in Otonomy (OTIC +5.58%).
Earnings and Economic Numbers from seekingalpha.com…
Today’s economic calendar:
8:30 Chicago Fed National Activity Index
9:45 PMI Services Index Flash
10:00 New Home Sales
10:30 Dallas Fed Manufacturing Outlook
Notable earnings before today’s open: OSIS, QIHU
Notable earnings after today’s close: ADEP, FN, PSEC, RENN
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Aug 25)”

  1. Futures are up big this morning, were up even more at their peak (+10).
    If we open here, expect to see SPX 2000 printed.
    The big question, then, is will they push it higher or will there be a selloff?
    Can’t answer that, but I can say there are multiple support levels below and a
    mild to even moderate selloff would not affect the bullishness of the market. It will
    affect the perspective of the traders, however, so there’s a distinction to be aware of.
    Friday’s volume was the lowest of all 5 days last week.
    At 9 am, futures are +8.50
    Bonds are mildly bearish.

          2. yes, and it an excellent indicator.
            We have some resistance right here that they need to chew thru.
            My guess is even if it pulls back in response to the resistance, they’ll
            get their footing and continue north bound.

          3. Shorts were waiting at ES 1998 (roughly SPX 2000) and sold 1 tick below 1998, high so far ES 1997.75. Front ran the level. I think they might regret that.

          4. Eco Report: New Home Sales fell. Took some wind out of the bulls’ sails. Think that’s temporary.

          6. That might be all we get, hit my ES target and I may have added too much for the differential to convert to SPX.

    3. Take this FWIW re: the gap up. There is a target at approx 2003 SPX. Suspect a reversal if/when they hit it. Would not “sell the open” immediately, they’re gunning for 2000 and likely that 2003. Free advice, worth every penny of it, too.

  2. End of August, we float up on the belief that the Fed will keep rates steady to sometime in ’15. Fully invested, Chiefly in large value, Sm midcap and a few of Jason’s specials. Suspect some volatility in Sept, but overall up. Now seems promising if the ISIS stay home and we pickup jobs and income.

  6. funnymentally the insolvent europe banks are still the danger to usa
    with the previous 2.4 trillion usa bailout to europe banks at pensioner rates of zero .2 % by the FED
    This tarp bailout of europe by the fed has sold out usa
    but over the w/end usa used it to blackmail europe into sanctions against russia

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