US stock futures point to a lower open on Wall Street Thursday as worries intensify over European banks. The Euro fell to 15-month lows versus the dollar and an 11 year low versus the yen. Investors are growing more worried about European banks' ability to raise additional capital as the European sovereign debt crisis rumbles on.
European borrowing costs also continue to resume their climb, this time with France seeing solid demand, but a higher yields, on its first auction of 2012. Fears remain that France, one of Europe's bedrock economies along with Germany, could soon lose its AAA credit rating. The auction was solid good enough to stave off panic, but highlights dangers still facing the region.
Investors will also continue to watch US economic data closely, although right now it is being drowned out by the Europe. We have seen US data continually improve over the past few months, and tomorrow's employment report will be especially significant. Today we will see the ADP jobless claims come through at 8:30 ET. The ISM non-manufacturing survey is set to be released at 10 am ET. Many economists are hoping that the US can avoid the type of recession facing Europe if the sovereign debt crisis fails to resolve itself, and tomorrow's jobs report will provide the next piece of evidence.
TECHNICAL TAKE
Yesterday the market was basically unchanged, but bulls were encouraged that stocks were able to avoid a sell-off after the recent climb. Traders will now be able to use levels from the past few days to trade against.
Yesterday’s low in the S&P 500 ETF (SPY) was $126.71, and right now we are opening right around there. If this were to hold, it would make it an easier morning for the bulls. Under this area, I think crucial support lies where the 200-day moving average converges with the prior pivot around $125.75-126.10 on the SPY.
Look to see if any sectors can go green to help lead the market off the lows.
Apple (AAPL) is still looking good and filled the gap we’ve mentioned many times up to $415, which is a nice spot to take some short term profits. At this point, there are no “price points” to look at except the old highs which stand at $424-427, but we will probably needs a positive earnings report for these to get taken out.
Google (GOOG) is acting very well, but it's 30 points above my buy price of $630-635 so a rest is due. It was downgraded today. I will look to see how it handles the $660 area, but re-positioning for a long at the $648-652 zone would be more compelling (which is the start of the gap from January 3rd).
Amazon.com (AMZN) is still has a very bearish overall pattern, but remains oversold. If it can’t work its way back to the $185-190 zone the Bears might put the claws in for a much lower move below $150. Earnings will be key here.
Baidu.com (BIDU) is still holding above Monday's gap, and as long as it holds $118-122 it could try for additional gains up to $127-129.
Netflix (NFLX) had a big Move yesterday and became a stock we focused on in the Virtual Trading Floor T3 Live radios. See if it can show some relative strength for an additional move above yesterday’s high of $80.97.
Cisco Systems (CSCO) pattern is looking better, and we might get a trade around $19-19.10.
Banks were great yesterday. Buying the down open in JP Morgan Chase (JPM) and some others paid the active trader. Today might be a bit tougher with the questions facing European banks. Wells Fargo (WFC), JPM and Citigroup (C) are acting best in the sector. Goldman Sachs (GS) is lagging a bit. I would like to see this hold above $92.50, and if that takes place, buying above $96.50 could create some better action.
The Oil Service HOLDR ETF (OIH) is acting better as the right shoulder builds of this inverse Head and Shoulders Pattern. A break above $119.50 could be a good spot to get to tier two in some macro positions.
A few stocks off hand that are looking better include Apache (APA), Occidental (OXY), EOG Natural Resources (EOG), Pioneer Natural Resources (PXD), Caterpillar (CAT) and Deere (DE).
MasterCard (MA) got beat up on the first day of the year and then followed through on day two. It could be worth an active long on day three of this move for a trade. Visa (V) is the same, as usual.
Ags stocks are all over the place, but CF Industries (CF) acts best.
The Euro (FXE) was under pressure and flirted with the December lows, but the markets did a decent job ignoring it. Gold actually diverged in the morning and then popped with the Euro bounce. Let's see how this develops today.
*DISCLOSURES: Scott Redler is long SPY, OIH, AAPL, NFLX, GS, JPM.
