"Well I got a job and tried to put my money away
But I got debts that no honest man can pay
So I drew what I had from the Central Trust
And I bought us two tickets on that Coast City bus"
With the employment number behind us, the market has turned its attention to the earnings picture. Nokia's (NOK:NYSE) warning set the tone for the tape yesterday, quelling any upside in technology shares. The world's largest mobile-phone maker guided below consensus and swiftly fell 19%. That action dragged the Nasdaq down about 1% to close at 2059 (resistance is 2079/2094 with support at 2049/2034). The news also hit semi handset chip suppliers such as Texas Instruments (TXN:NYSE) (cracked its 50 day ma) and STMicroelectronics (STM:NYSE). The damage underscores the potential for volatility during earnings - so make sure to stay on your toes and adjust your risk accordingly.
The Dow finished slightly higher closing at 10570 and I'm looking at the considerable resistance overhead with support in the 10,500/10,458 area. The S&P 500 finished off a touch, to close at 1148. Near term resistance lies at 1150/1160 with support at 1141/1135. The NDX has resistance overhead at 1500/1508 with support at 1485-1475/1460.
Reviewing the internals, the volume flows were predictably on the light side yesterday during the shortened week, with 1.39 bln shares trading on the Big Board and 1.77 bln on the Nasdaq. The low volume leaves the possibility for some drifty action out there. On the NYSE, decliners outpaced advancers by a count of 2098 to 1207 with 182 new highs vs. 43 new lows. On the Nasdaq, decliners led advancers 2113 to 1046 with 179 new highs to 11 new lows. We'll monitor today's action for clues...
So where does all of this leave us? In terms of the question of leadership we're still battling / undetermined. The semi's (SOX) were off about 2%, trading toward key support at 500 (with resistance at 513/518). 500 is important as it's obviously past support, but it also lines up as the lower end of the upward channel and the site of the 50 day ma. We'll have to see how the group reacts if/when we get there.
I remain focused on the financials and their ability to digest the employment data and I agree that the action in Citigroup (C:NYSE) remains THE key trading tell as a proxy for group sentiment. I've also got an eye on the brokers (XBD) at the 700 level. For what it's worth, the Bloomberg REIT Index (BBREIT), after cracking the downtrend line we highlighted, dropped another 4% yesterday.
Turning to the bond market, the 10 yr note, which had seen yields skyrocket (prices fell) from 3.88% on Thursday to 4.208% on Monday, closed at 4.149%. The bond market absorbed a supply of 5 year notes yesterday. Keep in mind, the Treasury will sell $9 billion in TIPS today and that may provide clues about the level of participation on the part of foreign central banks (particularly Asia) that Prof. Succo has highlighted as something to monitor. Interestingly, Moody's upgraded Japanese foreign currency debt to Aaa this morning citing a stable outlook and higher reserves. We wondered on the Buzz, if perhaps the biggest tell for the equity market will be the action in the bond market (spreads and the impact on the "carry trade" / financing cost for lower quality issuers). They've been a good indicator in the past and that's why I give mention here.
Alcoa (AA:NYSE) missed by a penny last night after the bell and was light on the top line as well. The stock had managed to work thru resistance at 36 - we'll see how the numbers are digested. Disk drive maker, Seagate Technology (STX:NYSE), guided Q3 EPS lower after the bell to $0.06-$0.08 (from $0.21 consensus). We'll see how that affects related tech names. Kellogg (K:NYSE) raised guidance on Monday and the stock touched a 52 week high before closing at 40.34. The move carried Kellogg thru resistance at $40 and gave a bid to some of the consumer names. General Electric (GE:NYSE) climbed toward resistance at the 50 day ma (32) and came back in yesterday (has support at 31). It's acted better of late and remains an important indicator here in my view. Deere (DE:NYSE) hit a new 52 week high yesterday. Proving there is still some pretty powerful momentum out there, Taser (TASR:NASD) climbed $13.75 (nearly 18%) yesterday to a new 52 week high. Further demonstrating that there's always an opportunity to be found somewhere...
The transports managed to hold in the green yesterday. The Index (TRAN) has resistance at 2986/3000 with support at 2950/2930. It may be oversimplifying to equate the activity in the transports with the level of economic activity but it's something to take note of. And, with action like that in JB Hunt (JBHT:NASD) you certainly should.
The biotech's climbed to resistance and failed at recent highs (555). The BTK has support at 545/539 with further support at the 50 day ma (530). Again, the heavy trading in Amgen (AMGN:NASD) stands out and if the group is to act better I'd be looking for some traction there. Genentech (DNA:NYSE) has earnings tonight - it's also a gauge for biotech sentiment (managed to hold 110 support).
As always, we'll scan the action and highlight the relevant info as it all unfolds. Good luck.
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