March (Employment) Madness
Hit it Hard!
Note: With this article Minyanville is proud to introduce Greg Collins as a contributor to the News & Views. Greg has added his insights to the buzz and will check in with his insights in this forum from time to time.
I got no financial conscience
Can't worry where it went
A lasting treasure, a moment of pleasure,
Worth it every cent
Good morning and welcome back to the daily shuffle. I'd like to express my gratitude to Toddo and the other professors for allowing me the opportunity to contribute to Minyanville. The bar has been set extremely high here in the 'Ville and I'm looking forward to doing whatever I can to add value to the process.
After Friday's employment fiesta, we awake to find the minx thru important technical levels. We definitely saw N's over S's as money flowed out of the financials and into technology. There's sure to be posturing on both sides so we'll see how both camps spin the number and how the market digests it all. The key question is whether or not this employment data is the missing link the bulls needed to try to take the market higher or simply more noise until it's all sorted out. April is historically a good month for equities so we'll see how long we chew on the number before shifting attention to earnings.
The Dow gained roughly 1% to close at 10,470 - just above its 50 day ma (10,461) which would be first support / then 10,400. Overhead resistance remains here thru 10,482/10,500. Strength was driven by Caterpillar (CAT:NYSE) which pushed thru 80, along with Intl Business (IBM:NYSE) which broke its downtrend. The S&P 500 Index posted a gain (+0.85%) piercing the 50 day ma / resistance at 1135 and eyeing overhead resistance from here toward 1145/1150 with support at 1125/1120.
The Nasdaq raced higher as a function of the rotation, posting a gain of 2% to finish right at the March highs (2058) and eyeing resistance toward 2100. On the move, we punched through the 50 day ma (2022) and that would be logical support. The NDX was up 2.5% toward resistance at 1500 with support at 1469/1450. The move higher was helped along in part by Sun Microsystems (SUNW:NASD) which spiked higher after settling a dispute with Microsoft (MSFT:NASD) that will result in a payment to the company of $1.6 bln. The small cap filled Russell 2000 (RTY) finished right at a 52 week high near 604.
The bond market got clobbered as a swift rise in yields (fall in prices) resulted in a close in the 10yr note at 4.145%. The move shook the rate sensitive financials (banks, mortgage lenders) as well as the home builders. The dollar index (DXY) was up 1.5% to close at 88.51. The lethargy in the banks, as Todd was quick to point out, was the most notable action in the equity markets. The Philly Bank Index (BKX) finished the day down 1% to close right on its 50 day ma (100.20). It has support in that area (where it tested in Feb). Citigroup (C:NYSE), which remains THE tell here, closed toward the bottom end of its channel - watch the action there for signs of traction/slippage in the group. For their part, the brokers (XBD) also pulled back, to close right on their 50 day ma (709) - with further support at 700. Keep in mind, after the Street sold the group on the earnings, the brokers helped to provide some much needed momentum off the recent low. The financials hold the key here and remain the biggest tell for this market - we'll have a hard time sustaining a lift off without them on board. For now, we'll see how the battle between banks and chips plays out.
The acquisition of Hudson River (HRBT:NASD) by First Niagara (FNFG:NASD) on Friday underscores the consolidation dynamic in the financial complex. After a big run in the large cap banks, and with chatter about valuations there, the smaller regional names continue to garner interest as banks attempt to balance size, scale, and efficiency while seeking to obtain strategic geographic footholds.
The semi's, after the robust SIA report, led the tech charge higher and pushed thru resistance at 500. From there, a combination of rotation, momentum / technical buying and short covering fueled the group's nearly 4% trek higher. Applied Materials (AMAT:NASD) broke thru the $22 level we had been keying off on the lift. There was optimistic chatter from the Street about earnings (JP Morgan) and that, along with the recent positive comments about MU / DRAM pricing, were more than enough to entice buyers / discourage the shorts. Remember the chips were the first group to show traction off the Mar 24 lows (up 13% on this leg) and while a ceiling of resistance lies ahead, we've now managed to decisively break the downtrend off the Jan slide - they will be a key tech tell. We'll see if that crowded house gets squeezed some more or if the momentum fades.
The biotech's also got a shot in the arm from the rotation and the Amex Biotech Index (BTK), after working thru resistance at 528, tacked on a gain of nearly 3%. That leaves the group eyeing the early March highs. BBH closed at the highs for the day and would get a checkup at 150 resistance / 143 support. IBB is sitting on resistance at 80. Amgen (AMGN:NASD) bounced for the first time since announcing the TLRK deal and is now at the upper end of the channel. The cancer related names typically start to get some interest this time of year ahead of ASCO so we'll see if that develops to help buoy the group. Watch Genentech (DNA:NYSE) ahead of earnings on Wed (staring at the highs) and Celgene (CELG:NASD) (recent leadership - closed Friday at new highs) as trading tells for the sector.
The transports have had it on cruise control of late and are up 8% off support. We've got a traffic jam of resistance ahead here (2885/3000) - lower oil prices recently (off the 3/18 high of $38 / brl), have been the primary driver and helped give the group a bid. The cyclicals (CYC) have climbed right to resistance at 700. The Drugs (DRG) had been under the weather but recently managed to break above their 200 day ma (324) on the heel's of Pfizer's (PFE:NYSE) inclusion in the Dow. The Philly Gold / Silver Index (XAU) cracked the 105 level (gold is at the $420 / oz. level). Note the VXO finished at 15.56 on Friday, well off the 3/11 high (21.71).
Checking out the week ahead...Beeks swings by with data throughout the four day week. On Tuesday, Alcoa (AA:NYSE), which posted a gain of 3.5% toward resistance at $36 reports earnings. On Wednesday, the BOE meets, FedEx (FDX:NYSE) and Dell (DELL:NYSE) - (gapped thru resistance at 34 now staring at 35) - have analyst meetings, and Genentech (DNA:NYSE), Yahoo (YHOO:NASD) (just made a new high), and Research in Motion (RIMM:NASD) deliver earnings. On Thursday, Abbott Labs (ABT:NYSE), General Electric (GE:NYSE) (thru resistance at 31), and Rite Aid (RAD:NYSE) (we'll see if it can break that trend line at $5.50) all report earnings.
With a short week and many away from the trading turret, it could be an even lower volume affair. That leaves the potential for some choppy action - so stay on your toes. As always, we'll scan the action and highlight the relevant info as it all unfolds. Good luck.
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