Before the Open (Aug 28)

Posted on by Jason Leavitt

Good morning. Happy Thursday.
The Asian/Pacific markets closed with a bearish bias. Japan, Hong Kong, China and Australia dropped 0.5% – 0.7%. Europe is currently down across-the-board. Austria is down 2%; Germany, Spain, Italy, Stockholm, Prague, Russia and Greece are down more than 1%. Futures here in the States point towards a moderate gap down open for the cash market.

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The dollar is up slightly. Oil is flat, copper is down. Gold and silver are up.
The reason for today’s premarket weakness goes straight to Eastern Europe where tensions between Russia and Ukraine have escalated. I guess talks between the countries haven’t gone anywhere, and now there are reports of Russian military incursions into Ukraine. I’ve said this before…Russia is major military power and Putin cannot be trusted. What’s going on in Eastern Europe is far more combustible that the Middle East.
If Wall St. could pick a time where escalating tensions overseas caused the market to drop, this would be a good time. The S&P hit a new all-time high two days ago and has closed above 2000 two consecutive days. It has moved up about 100 points since bottoming earlier this month and has barely corrected in three weeks. A rest is needed before attempting to rally again.
I still like the market overall, but how you manage positions depends on your trading style. When the market gets over-bought, you can keep doing what you’re doing because you look into the future long enough that a minor correction doesn’t bother you. Or you could lighten up and look to re-enter and lower levels…at the risk of missing upside should the market not correct. Have a plan and stick to it. Personally I lighten up.
We have a 3-day weekend ahead of us, and with the volume and volatility already falling off, unless things continue to escalate in Eastern Europe, the next two days are likely to be slow. More after the open.
Stock headlines from barchart.com…
Dollar General (DG +0.28%) reported Q2 EPS of 83 cents, right on consensus, although Q2 revenue of $4.72 billion was below consensus of $4.77 billion.
Pall Corp. (PLL -0.48%) reported Q4 EPS of $1.14, better than consensus of $1.06.
Signet Jewelers (SIG -0.36%) reported Q2 organic EPS of $1.00, better than consensus of 98 cents.
British Petroleum (BP +0.37%) was downgraded to ‘Underweight’ from ‘Equal Weight’ at Morgan Stanley.
Brown Forman (BF) was downgraded to ‘Hold’ from ‘Buy’ at Deutsche Bank.
Visa (V +0.18%) was downgraded to ‘Market Perform’ from ‘Outperform’ at Raymond James.
Genuine Parts (GPC -0.02%) was downgraded to ‘Neutral’ from ‘Buy’ at SunTrust.
Advance Auto Parts (AAP +1.01%) was initiated with a ‘Buy’ at SunTrust with a price target of $181 and O’Reilly Automotive (ORLY +0.23%) was also initiated with a ‘Buy’ at SunTrust with a price target of $193.
Williams-Sonoma (WSM +0.05%) slid 10% in after-hours trading after it reported Q2 EPS of 53 cents, right on consensus, although Q2 revenue of $1.04 billion was below consensus of $1.05 billion. The company then lowered guidance on fiscal 2014 EPS to $3.07-$3.17, below consensus of $3.20.
Guess (GES -0.74%) fell 8% in after-hours trading after it reported Q2 EPS of 26 cents, weaker than consensus of 29 cents, and then lowered guidance on fiscal 2015 EPS to $1.05-$1.20, well below consensus of $1.46.
Earnings and Economic Numbers from seekingalpha.com…
Today’s economic calendar:
8:30 Initial Jobless Claims
8:30 GDP Q3
8:30 Corporate Profits
10:00 Pending Home Sales
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
1:00 PM Results of $29B, 7-Year Note Auction
3:00 PM Farm Prices
4:30 PM Money Supply
4:30 PM Fed Balance Sheet
Notable earnings before today’s open: ANF, COTY, CSTM, DATE, DG, FRO, GCO, IKGH, PLL, SIG, TD
Notable earnings after today’s close: ANFI, AVGO, FRED, OVTI, PSUN, RALY, SPLK, UEPS, VEEV, ZOES
Other…
today’s upgrades/downgrades from briefing.com
this week’s Earnings
this week’s Economic Numbers

0 thoughts on “Before the Open (Aug 28)”

  1. Futures were mildly bullish until 550 am when they took a dive down to -9.50.
    They recovered a bit and despite the rosy reports from our always-credible government,
    they have slipped back down to -7.50 as I write this at 9 am.
    Whether the start of something big to the downside — as always, I’ll give you some markers.
    If we break 1991-90 SPX (overnight low translated to SPX) we could drop to 1985.
    If they take it up after the bell, SPX 1995 will present resistance and there is more above it from 1996 thru 2001.
    They could attempt to take it up to yesterday’s close and drop from there.
    Today requires paying close attention, and don’t get giddy if you see green numbers after a climb; they love to get you relieved that we’re “back in the plus range,” then pull the rug.
    Not saying get bearish, either. Just be careful.
    There are multiple levels of support below,
    just depends which one they decide to establish as their anchor.
    Important day today.
    Bonds bearish.
    Will be here around noon, if at all, tomorrow.

    2. What I see so far.
      They have held the overnight low. SPX 1990.5. If that holds, we can expect a target over 2000, like 2010.
      What has contained us, however, is the resistance at SPX 1995.
      The bulls do look like they have their footing, at least IMHO.

      1. Nice move by the bulls, that just chewed up the lower portion of resistance. Another point and a haf higher, about SPX 1999 and they will have the bears concerned. It should pull back, and if so, go no lower than about 1993. I’ll update.

          7. yeah, a lot like Friday, then sunday night they blew the top off. We’ll see what happens overnight.

  2. end of month selling junk
    will it be a 1 to 4 day correction or the start of the end of the world
    lacks volitility for a top and would be unlikly
    the bears did their best to push it up on no volume
    so the slightest selling presure could go a long way

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