Market Action Summary: 2/4/19

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S&P 500 Overview:

  • Melt-up underway, with no clear resistance until 2800.
  • VIX lowest since early October. S&P 500 just had best month since October 2015.
  • Next 2 weeks has positive calendar bias amid earnings. Risk may return 2/15 (shutdown), 3/1 (China tariffs).
  • Sector mix shows risk-on sentiment:
  • Stocks rising on mediocre news, unlike last quarter.
  • Merger speculation increasing (ULTI, GCI). Tech, biotech likely to benefit.
  • Next possible catalyst: What if bond prices break lower?

Work Space of the Week: Cannabis

  • Cannabis stocks continue to draw attention.

Strategists Remain Bearish …

  • Marketwatch: Slowest earnings growth in 5 quarters.
  • Business Insider: Fewest companies beating estimates in 7 years.
  • JPM: China failing to boost economy, zombie companies becoming a risk.
  • Stifel: S&P 500 peaking as earnings slow, multiples fully valued.
  • … despite apparently positive economic backdrop.
  • … despite stocks climbing on mediocre results: UPS, GE, AAPL, CHTR, AMD

Energy in Focus: Is the Tide Turning?

  • High-beta frackers like SLCA, HCLP outperforming.
  • Brent crude stabilizing as Saudis cut production. Is OPEC back in business?
  • Stronger Brent often helps refiner “crack spreads.”
  • Venezuela supply at risk amid Maduro showdown.
  • Baker Hughes rig count hits 8-month low.
  • Inventories last week fell more than expected.

Don’s Watch List:

  • Cronos (CRON): Pot stock hitting new highs.
  • Papa John’s (PZZA): Starboard Value buys a slice
  • Meet (MEET): Up and coming social-media name.

Russell’s Watch List:

  • Cheniere Energy (LNG) consolidating above 200-day MA before possible China deal.
  • Tilray (TLRY) trying to break 50-day MA.
  • Etsy (ETSY) potential bullish triangle.
  • Herbalife (HLF) quietly hitting new highs.
  • Diamondback Energy (FANG): New S&P 500 member trying to turn at 50-day MA.
  • Whiting Petroleum (WLL), US Silica (SLCA) may squeeze higher.
  • LendingTree (TREE): Golden cross, pullback may provide entry.
  • Intelsat (I) breaking 50-day MA. Possible 5G, spectrum boost.
  • Pollo Loco (LOCO) potential momentum pullback.
  • Video games (ATVI, EA, TTWO) conspicuously absent from 2019 market bounce.

Forward Calendar:

  • Tech, health care, communications/media lead the earnings.
  • Wednesday: Oil inventories (mid-morning), Jerome Powell town hall (evening)
  • See the Market Insights weekly recap for more.
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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.