Markets are moderately lower today, as 4:00 options expiration near. While most indexes are slightly down, shares of AAPL are finally seeing some relief, up 2.5% on the day. However, despite the strength by this tech giant, the Nasdaq is a relative market laggard, down 0.2% on the day. The Russell 2000 is today’s winner, up 0.1%. Bonds are seeing a slight bid, up 0.2%, as are metals and miners.
CHART OF THE DAY
Freeport McMoran (FCX) – The copper mining company has been relatively weak this year, near breakeven while equity markets are off to a great start. However, despite the weak price action, sentiment toward FCX remains very bullish. The company was upgraded by Goldman Sachs today, and the stock is up about 2%. Currently, 10 of the 13 analysts covering FCX have it rated a “buy,” with the other three maintaining “hold” recommendations. This creates the potential for future downgrades, which could act as a headwind. In addition to bullish analyst alignment, sentiment in the options market remains bullish as well. This creates the potential for an unwinding of these bullish positions, which could drive the shares lower.
I like a short entry here with a stop on a close above 35. I would initially target a move down to 32, with 30 being a stretch target.
WHAT I’M EXPECTING
A continue push higher toward all-time highs on the S&P 500. I believe the best way to play continued strength in equities is to initiate bearish bond positions here and now. The 116 level looks like key resistance on TLT, and there remains an unfilled gap at the 113 level. Given how well bonds have held up this week, they appear to be ready to break down next week in a game of “catch up” with the recent equity strength.