Tuesday, January 28, 2014

Stocks Bounce But Apple Weighs On Nasdaq

Stocks are bouncing in early trading.  They attempted to bounce yesterday also, but sellers emerged fairly quickly and helped push stocks lower for a third consecutive day.  Markets are now pretty oversold, so a bounce from here would not be surprising.

Housing stocks got a boost from a strong Case-Shiller report which showed that housing prices rose 13.7% in November, which followed a 13.6% increase the prior month.  Separately, the consumer confidence report for January came in at 80.7, which is a nice increase from last month's reading of 77.5.

Most sectors are trading higher this morning.  The tech sector is being weighed down by two reports.  One is Seagate (STX) which missed estimates slightly but the stock is down -10%.  The other is AAPL, which beat estimates but sold less iPhones that the Street was looking for.  The company mentioned supply constraints and some changes at mobile carriers.  Also, it looks like the company gave conservative guidance for next quarter which may have disappointed some investors.

Asian markets were mixed overnight.  The Reserve Bank of India hiked its key rate to 8.00% last night from 7.75%.  Also, money market rates in China are on the rise again, despite the People's Bank of China conducting operations to improve liquidity.

Europe's markets are higher.  Great Britain's GDP rose 2.8% year/year, and consumer confidence rose in both France and Italy.

The 10-year yield is pretty steady so far at 2.76%.

After its recent spike above the 18 level, the volatility index is lower by 6% so far today to 16.35.

Trading comment: The S&P 500 may have found some short-term support near the 1775 level it tested yesterday.  This was also the area the SPX bottomed at back in December.  But we still think it is prudent to be patient here.  The most common course of action is for the market to bounce in the short-term, but then turn lower after running into resistance.  Said resistance could come in the form of the overhead 50-day average, which resides near SPX 1812 currently.  Then there is often another pullback when we see if the near-term support holds again or if it breaks and the market moves lower.  It is also during this time that new leadership often emerges.  So that is what we are on the lookout for at this juncture.

KAM Advisors has long positions in AAPL and STX

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