US stock futures are almost 1% higher this morning, continuing the market's strong start to 2012. Economic data out of China provided much of the impetus for the long-weekend rally, with GDP growth coming in higher than expected. Data suggests China is headed for a more gradual slowdown, rather than the hard landing that many once feared. The Euro zone also saw inflation fall below expectations, opening the door to more possible easing.
The banks are under a little bit of pressure again this morning, however, after Citigroup (C) became the second company in the sector to disappoint with earnings. Last week it was JP Morgan (JPM) that fell short of expectations with its Q4 earnings report, and this morning C missed on both the top and bottom lines. Wells Fargo (WFC) stemmed the tide a bit with its report, also this morning, in which the emerging bank leader beat on both EPS and revenues. However, the stock hasn't been able to get much of a lift on the news. Bank of America (BAC) and Goldman Sachs (GS) are set to report earnings later this week, and investors will be keeping a close eye on those announcements.
TECHNICAL TAKE
Bull markets are formed when the market aggressively buys good news, and hardly sells off on bad news. We are starting to see a little bit of that trend emerge. The markets last week absorbed the long-awaited downgrade of France and other smaller Euro zone economies, and bond yields on the continent remain unsustainably high. In spite of these factors, the market is rallying, perhaps seeing brighter skies on the horizon.
These factors are why technical traders ultimately watch the price action as their main decision driver. The France downgrade seemed to be expected, and it was a relief to the market to get it out of the way. Greece seems headed for a hard default, but investors do not appear to be surprised or mortified by that outcome, either. The fact that China's GDP growth this quarter came in better than expected simply provided more fuel to the weekend rally.
Since the December 20th gap and go the markets have been very tradable. Dips have been buyable and rotation has been strategic. We are even seeing stocks break out to new highs every now and then, which is a very healthy sign.
Today the S&P’s are opening at new highs after closing well off of Friday’s low. Buying into these big gap ups has been a bit tricky thus far in 2012, so it is not a time to get over-zealous. The first resistance zone to watch is around 1307-1312. The bigger zone to watch is around 1318-1322, which was my price projection for the first Quarter of 2012.
STOCKS
Apple (AAPL) had a big move back to the old 2011 highs and decided to take the week off. We now have a nice high level flag. If it starts breaking back above $422-423 it could try and take on the $426-$427 area. It might take earnings to get some real traction here.
Google (GOOG) had a hard break in the first week of the year after a nice 30-point move up for the community. It’s still holding the 50-day moving average. I will be long small calls that have limited premium into Thursday’s earnings, but very small. I will revisit this later the week.
Netflix (NFLX) is acting very frisky. There were nice entries on Thursday and Friday. If it can get some volume and trade through $96.50-97.50, I think it can take out $100+ very quick.
Amazon.com (AMZN) stock has been technically broken since the last earnings report, but is desperately trying to hold this lower level. I’m just trading it in spots for now. If it can hold above $179.50 we could see a squeeze to back to $185 and then perhaps $190 area.
Priceline.com (PCLN) looks okay, but I’m avoiding it. Above $487-490 and this can get going a bit.
Quallcomm (QCOM) has a nice Macro Pattern. A daily close above $57 should set this in motion for the highs of last year.
Cisco Systems (CSCO) moves very slow but is trying to work higher.
Microsoft (MSFT) has been impressive. I put this on the radar around $27ish when it broke its descending channel. Then it blew off the “PC slowdown” news. This was my surprise stock from the Morning call and Bloomberg. It has earnings this Thursday.
Intel (INTC) still needs time and is not ready to break above the Fall highs.
The Agricultural Group helped to lead the market higher on Friday.
CF Industries (CF) is leading the way and should be the first to see the highs of last year. Resistance sits around $177 then $190.
PotashCorp/Saskatchewan (POT) we’ve been hawking this for a few days. Finally it broke above $44—should be above to see $47-$49 pretty quick, then bigger resistance is around $51.42.
Mosaic Company (MOS) is moving somewhat slow since faulty earnings – but it can play a little catch up above $55.72.
Caterpillar (CAT) and Deere (DE) both look good and triggered long above some of my previous levels from Morning Call.
Casinos are acting better.
Las Vegas Sands (LVS) is in the middle of the range but can continue higher.
MGM Resorts (MGM) has been very impressive since we listed it around $10.50 a few weeks back. I would take some profits into $12.75-13.25 zone.
Wynn Resorts (WYNN) has had some problems but seemed to capitulate to the downside last week. I think it if can get above $111-$112 it can snap back a bit.
Industrial cyclical’s are doing much better, which we covered in the Morning Call video today.
3M (MMM) is holding above previous resistance of $83. It's ranging for now, but look for a breakout above $85.
United Technologies (UTX) broke a downtrend at $75. Look for a buyback in that area.
Alcoa (AA) earnings are out of the way. Maybe it can get some upside follow through above $10, but it's a slow mover.
Honeywell International (HON) is, technically speaking, acting well. This was on T3Live's Off the Charts with a buy price above $55.50-56 and has now cleared that area.
Banks took JPM poor earnings in stride. Now we need to see the rest of the field come out this week. Citigroup (C) and Wells Fargo (WFC) were a mixed bag this morning, in keeping with their technical relative strength. If the group can continue to absorb these types of reports, it will be very healthy for the markets.
Technically JP Morgan (JPM) has a move from $32ish to $37ish before earnings so a rest made sense. The low $35 area held well.
The Oil Service ETF (OIH) has been a bit slow and sloppy, but still moves higher. Energy ETF (XLE) looks better still.
Gold (GLD) has acted much better since the first week of the year. FXE was making lows first few days of the year, and Gold and Silver diverged. You must notice this type of relationship if you are going to trade these markets. GLD also had a nice upside reversal on Friday. GLD will see some bigger resistance around $163-165.
Overall this is a very healthy, methodical tape making it possible to hold multiple positions. Dips have been buyable and money keeps rotating through sectors. Take advantage of the action while it presents itself, but never get over-excited as we have seen what this market is capable of.
*DISCLOSURES: Scott Redler is long SPY, OIH, QCOM, CSCO, NFLX, POT, WYNN, GOOG calls. Short DIA.
