Monday started a new week and the beginning of second quarter earnings season. As always, please see our primer on how to prepare for this very tricky time of the year. As for the market economic news will slow down this week and instead eyes will turn (again) to the Fed Wednesday with the release of the minutes from the recent meeting, along with earnings. Today we saw a day very similar to almost every day of this rally except for last Friday – a gap up to start the day, some intraday volatility and a close near to where the market gapped up to. This leaves very little opportunity to do much intraday as almost the entire move is in the overnight session. At the close the S&P 500 gained 0.53% and the NASDAQ 0.18%; semiconductor and biotech weakness contributed substantially to the lagging action in the NASDAQ. They key economic report on the day was consumer borrowing, which expanded at its fastest pace in a year:
Americans stepped up their borrowing by $ 19.6 billion in May compared with April, the Federal Reserve said Monday in its monthly report on consumer credit. That was the biggest jump since a $ 19.9 billion rise in May 2012. The category that includes credit card use rose $ 6.6 billion, also the largest gain in a year. Credit card debt reached $ 847.1 billion, the most since September 2010. Borrowing for autos and student loans rose $ 13 billion in May. That was the sharpest increase since February.
Turning to the markets the major indexes continued their breakouts albeit in modest fashion. In the near term some rest would be prudent as things have come a long way since the June 22nd lows. The S&P 500 cleared the 1625ish area Friday as needed, and today made an attempt on the trend line that connects all the lows of 2013. Usually these key areas are not bested in one session so a stall here is understandable. A day or two of rest and then another attempt would be most healthy. But maybe with this sort of market that seems to gap up almost every day they will try to clear it that way tomorrow.
Now that the market is becoming more healthy and most sectors are not moving en masse as individual stocks can shine, we’ll turn our focus back to more individual stocks. But before we do that, it would be good to highlight the regional banks which we’ve noted specific strength in for the past 6-7 sessions. Today’s bar (candle) was short term negative as we had a push to new highs and then a close at or new lows. That usually signals a short term exhaustion signal which is no surprise as these stocks have moved extremely far in a short period and are now quite a bit away from any support. So it would be a positive to see this group rest a few days while other groups did some legwork.
Let’s turn to Dan Zanger from ChartPattern.com for charts of two of the most popular stocks in the market – Google (GOOG) and Netflix (NFLX); these are from last night’s letter. First Netflix which Dan noted had a technical buy area above the $ 227 area… today the stock broke upward 3% to the $ 233s.
Then Google which he noted would come out of this triangle at the $ 903s, today it rallied 1.3% to the $ 905s.
Priceline.com (PCLN) jumped on a Morgan Stanley upgrade, with a price target of $ 1010. We can see it broke out last Monday and held that breakout all week, so if you bought that pattern you were fortunate enough to benefit from today’s brokerage move.
As Priceline gains market share globally, the economic environment improves and more bookings move online, investors will pay a higher price for the company’s earnings, Scott Devitt, an analyst at Morgan Stanley, wrote in a research report today. He upgraded the stock to overweight from equal weight and raised his price estimate by 33 percent to $ 1,010. “Priceline has gained market share in the European online travel agency space amidst heightened competition from Expedia,” Devitt said. “Booking.com will maintain its dominant competitive position due to its strong value proposition to hotels and customers.”
A lot of housing stocks have been hit due to rising mortgage rates but online real estate company Zillow (Z) has held in relatively well. While the chart has been a bit choppy of late today the name surged.
Quite a few retail names held in very well during the 7 week correction; one such name was Macy’s (M), which today broke out of its pattern. One can purchase on a day like this once the mid $ 49s level is breached and set a stop loss there in case it reverses. Just keep in mind all these companies report same store sales Thursday so will react to that figure in the short term.
As we move forward we want to continue to see individual stocks move well like this and not be hostage to the overall market. Seeing breakouts hold and not completely reverse in a day or two is also important. If we find those sort of names, what the overall market does is not that important to our success.
One key loser today was Intel (INTC) which hurt the semiconductor sector. We can see this stock recently lost its 50 day moving average so for those who focus on buying relative strength, it was a name to avoid until its technical outlook improved.
Original post: STTG Market Recap July 8, 2013
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