Minyanville's T3 Weekly Recap: Stocks Sell Off Into Options Expiration, Judgement Day*

The S&P had a tough day after running into resistance at the 1348-1352 level, closing near the lows after some late afternoon selling. On an options expiration Friday, all action must be taken with a grain of salt. At this stage, however, all bets are off and traders are opting to stay nimble with indecisive action. The summer can often bring range-bound, frustrating action for traders chasing breakouts and breakdowns, so it's best to avoid getting over-aggressive at this point in time.

The banks continue to be a drag on the market, with Goldman Sachs Group, Inc. (GS) remaining the weakest among them. The former bank darling dropped 3.1% as the threat of possible criminal action from the Department of Justice looms. The sector's strongest stock, JP Morgan Chase & Co. (JPM) was not even spared, dropping 2%.

*T3Live.com does not endorse evangelist Harold Camping's opinion that Judgement Day is coming tomorrow.

Watch the T3Live.com Daily Recap below with Scott Redler.



Market leader Apple Inc. (AAPL) was also weak after a three day bounce back up into the 21-day moving average. News of an explosion at one of their plants in China that produces iPads contributed to the sell-off.

Retail stocks got hit hard this week as sales are slowing and margins are shrinking. The writing was on the wall when Abercrombie & Fitch Co. (ANF) pulled off following strong earnings and J.C. Penney (JCP) sold off its earnings gap up aggressively. If you are looking for a ray of light in the group, it's popular yoga apparel maker Lululemon Athletica, inc. (LULU), which continues to hold in an upper level consolidation. After a nice run, this group seems like an 'avoid' for now.

If you are looking for strength in the tech sector, look no further than Netflix, Inc. (NFLX). I'm only half kidding when I say perhaps investors are warming to NFLX's valuation after seeing the way LinkedIn Corp (LNKD) has been bought aggressively despite an astronomical valuation. From a technical standpoint, NFLX has held up extremely well despite selling in the market, standing near pivot highs just below $250. A break above that level should take NFLX to new highs above $255.

No conversation about the markets this week is complete with further discussion on LinkedIn. The words social networking bubble must have been uttered a thousand times in the media over the past two days, and the talking heads might have a point. The company has thus far not shown the earnings potential that can justify its current price levels. In the case of most highly valued stocks, investors are counting on companies that are already generating fast-accelerating profits to continue on their pace. In this case, LNKD hasn't even started that train moving, so investors are basing decisions not on future cash flows, but on fantasy cash flows.

To give you some more value perspective on LNKD, from Business Insider:
 

"Looking at the multiples based on the closing price of $94.25, LNKD trades at ~14x forward sales. To put that in context, the best SaaS companies trade at 5-7x forward sales. The closing price would also imply the company trades at ~100x forward EBITDA, vs the best SaaS companies that trade at 20-40x. Forward PE is not too meaningful since the company is hitting an EPS inflection point. So by looking at these near term multiples, there’s no denying LinkedIn is expensive. One bit of caution here on these multiples is that the near term financials are likely suppressed due to the investment period the company is going through as it builds for the long term."

After opening higher this morning and initially surging, the stock gave back all of its gains for the day.

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