Market Action Summary: 2/11/19

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S&P 500 Overview: Signs of Fatigue as Catalysts Dwindle

  • Momentum slowing. Last week had narrowest point range since late September.
  • Highs before open w/failed rallies near 2720. Then resistance moved down to 2712 pre-market pivot. (Support → resistance?)
  • Lots of uncertainty about China, shutdown. But “good news” of positive resolutions seem to be mostly priced in.
  • Lack of leadership, with safe-haven REITs and utilities closest to 52-week highs.
  • Potential resistance at late-June low and 100-day MA.
  • Still, considerable upside potential catalysts remain apart from headline risks.

Economic News Less Positive / More Dovish:

  • Jobless claims higher than expected for 2 straight weeks.
  • Rail traffic weakest since early 2017.
  • Australia, India central banks turned dovish last week.
  • Fed dropped rate hike mention on 1/30.
  • Yellen on 2/6: Fed’s next move may be to cut.
  • Several weak readings from Europe last week.
  • Despite these readings, “binary” political events are to blame: like Brexit, US-China trade war, potential government shutdown.
  • That creates upside potential on signs of resolution, even if data stays weak.
  • Semiconductors seem to be main trading vehicle, either way.

Don’s Watch List: Barron’s Sustainability

  • Best Buy (BBY)
  • Cisco Systems (CSCO)
  • Agilent Technologies (A)
  • HP (HPQ)
  • Texas Instruments (TXN)

Russell’s Watch List:

Wary of retail/consumer names post-holidays:

  • Target (TGT) stalling under $72.
  • Amazon.com (AMZN) under 50-day MA.
  • Video games extremely volatile. Layoffs and news of free products is hardly bullish.

Turnarounds Emerge:

  • Starbucks (SBUX) sneaks to new highs amid loyalty program, China traction.
  • Hanesbrands (HBI): Champion’s offsets innerwear weakness.
  • Coty (COTY): Messy consolidation shows signs of improvement amid heavy short interest.
  • Mattel (MAT): Barbie showing signs of regaining traction.

Potential Winners from China’s Huawei troubles:

  • Nokia (NOK)
  • Ericsson (ERIC)
  • Ciena (CIEN)

Big Techs Drifting Around Quarterly Results:

  • Alphabet (GOOGL) spending is a worry again. Core search slowly weakening.
  • Twitter (TWTR) sees cost pressures as users stagnate.
  • Don’t forget Nvidia (NVDA) reports Thursday night. (Bernstein downgrade today.)

Softwares May Be Next Growth Area:

  • Secular growth + dovish Fed often positive for high-multiple stocks.
  • CRM, COUP, OKTA, TEAM, NTNX, BOX, SHOP, FTNT, VEEV

Options Trades in Focus:

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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.