US stock futures are down sharply Monday after a lack of progress in Greek debt talks over the weekend. Officials were hopeful that a deal would be reached, but creditors and European finance ministers remain at loggerheads over the terms. The Euro currency fell from six-week highs following its strongest week in three-months.
European leaders, especially in Germany, are requesting greater economic oversight and control over the Greek budget in return for the latest round of aid. While many feel a fresh batch of aid will be inevitably granted by the fearful Euro zone countries, the German Finance Minster was adamant in the Wall Street Journal on Monday that the house must be in order for Greece to receive the latest tranche. A deal must be reached by March 20 in order to avoid a messy default that could trigger a domino effect in the fragile Euro zone.
Italy, thanks in part to extra liquidity provided by the ECB, has seen its 10-year bond yield fall below 6%, but faces a big test over the next two months. This week they will be auctioning over 8 billion Euros worth of five and 10-year notes, a significant barometer of demand for longer-term debt. Between February and April, Italy will need foreign investors to help refinance 90 billion Euros worth of bonds.
Also contributing to the sell-off late last week was some disappointing economic data in the US. The market has been boosted over the last couple months by steadily improving data that has investors hopeful of a more meaningful recovery. However, Thursday we saw new home sales hit record lows, signalling that the housing sector is still a long-way away from a turnaround. With February starting this week, we will get a fresh batch of data that could have a big effect on the market.
TECHNICAL TAKE
Last Thursday we saw a “push through failure" in the market, giving some clues to clean up some excessive longs after such a nice market run, but Friday’s “Tech Action” was hard to ignore in the face of a down tape. So there still is a ton to do both long and short for all different time frames.
Today will be interesting. The S&P 500 ETF (SPY) will be testing that important floor that has held numerous times last week. The $130.60-$130.80 level on the SPY continues to be the important spot. Will Bears have enough pressure to get a 30-60 minute close below this area, or, even more significantly, a daily close? Until this happens, the Bulls remain in full control. Having multiple positions with hedges is the way to manage this tape. A close below this level opens the door for $128.80-$129.30.
Tech was very frisky Friday. The Dow was down like 80 points and these stocks would not go down, then exploded at the end of the day.
Apple (AAPL) is building a nice floor to trade against. Right now that area is $442-444. With more time this stock should see new highs. A close above $449-450 would help that process.
Google (GOOG) finally gave a nice trade late last week. The stock has been in the penalty box since earnings, but a target buy vs. the $652 200-day MA did prove profitable. After a big move Friday, it should need some time to consolidate. See if it can go positive today.
Netflix (NFLX) has been a big winner for me in 2012. Great trade as it ignited above $75 in early January, then Recent earnings keeps it on the move and put shorts on the ropes. Friday the stock gave us two pivot buys. See if it can go positive today for a continuation trade today.
Baidu (BIDU) blasted off Friday. It broke it’s descending channel, but earnings are due out tonight. I will avoid until after the report. I might visit it around 3:30 for a earnings option play.
Sina (SINA) held the 50-day like we mentioned. It also exploded Friday, look to this to see if it can continue.
Amazon (AMZN) is also working well since our $183-185 pivot buy. There were two trades there: through that area and then the retest. Earnings are soon so know your time frame.
Microsoft (MSFT) is flagging. I think nibbling in the $28.75-29.10 could be good for some exposure here.
F5 Networks (FFIV) is trying to hold its earnings gap and needs some more time.
Casinos still act well
Las Vegas Sands (LVS) gave us nice upside action last week. It's resting in front of a major technical area and has earnings this week. Overall it looks like a ton of accumulation here for a big move to the upside this year. $49.75-$50.50 is big area and earnings will likely play a big role in the next move here.
Wynn Resorts (WYNN) is resting after a nice trade from $112 area, and still needs some time.
Oil Service ETF (OIH) is still working higher. I’ve been juggling between tier one and tier two, right now I’m in tier one.
Schlumberger (SLB) looks good above $77.75 perhaps it gets momentum.
Banks still act pretty well.
Goldman Sachs (GS) gave us a nice trade Friday through the $110 area I mentioned a few times. See if it can go positive and continue. It has room to $116.50ish.
Morgan Stanley (MS) was upgraded by GS today and has a nice flag type pattern. Above $18.85-$18.95 could get it going.
Citigroup (C) was also upgraded. Above $30.15 it can get some momentum.
US Steel (X) earnings are Tuesday and it looks okay. I’m not sure what I will do with it then.
Molycorp (MCP) is acting perky and could get going again above $32.20 with some volume.
Groupon (GRPN) has an interesting pattern. A close above $21 might break the pattern of lower highs and free it up for some action. Put it on the radar. Perhaps the Facebook buzz can spill over into Groupon.
LinkedIn (LNKD) I’ve talked about this a few times this year. Nice day Friday. The next level to get through is $77.20-77.50 and $85 is doable. Stock is very thin, though, and not for everyone.
Little Chinese names perked up, see if volume stays in Youku (YOKU), RenRen (RENN), DangDang (DANG) and Sohu.com (SOHU).
After a huge move in Gold and Silver. A a rest is due, perhaps some areas get retested.
Keep managing positions. Having good looking longs with hedges are working well. This lets you manage down opens like this. You can cover some shorts and add to stocks showing relative strength. Intraday you can also add shares when you have control.
*DISCLOSURES: Scott Redler is long SPY, OIH, AAPL, GOOG, NFLX, LVS, WYNN, X, MCP, WMT, LULU, DANG, GS, GERN, KV.A, DNDN calls, VXX. Short DIA.
