It seems as the market catalyst every day is a result of the latest news to surface on the Syrian situation, and today is no exception. Last night, John Kerry made comments stating that we would be very willing to work out an agreement with Russia and Syria, and that any chemical weapons would be overseen by international factions(likely the UN). As you might expect, markets liked this news, and stocks are rallying sharply again. Contrarily, gold, the “safety trade,” is selling off. Stocks are being led by the Russell 2000, which is higher by about 0.8%. The Dow, S&P 500, and Nasdaq are each up about 0.6%. Bonds caught a slight bid this morning, but they have fallen this afternoon after a worse-than-expected auction at 1:00. The fixed-income securities are lower by about 0.4% on the day. As previously mentioned, metals are getting hit today, with gold off 1.6% and silver nearly 3% lower.
CHART OF THE DAY
Equinix (EQIX) – The data center services concern has been very weak this year, lower by about 15% despite broad market strength. The shares recently made new 52-week lows and have since bounced, offering a nice entry for a continuation of its downtrend. Despite its weakness, sentiment toward the equity remains very bullish. Currently, 14 of the 16 analysts covering EQIX have the stock rated a “buy,” without a single “sell” rating. This opens the potential for future downgrades, which could act as a headwind. Additionally, option sentiment is near a bullish extreme. This opens the potential for a bearish unwind, which could cap any rallies going forward.
I like a bearish entry here with a stop on a close above 182. I would initially target a move back to 165, with 150 as a stretch target.
WHAT I’M EXPECTING
Stocks are now very overbought on a short-term basis, and should need some time to rest at the very least. Given how the current situation in Syria is dominating every market move and news headline, everyone has forgotten what lies ahead next week — the all-important “taper or no taper” decision. I would expect recent longs that are now well into the black to take some profits ahead of that risky event. The S&P 500 closed a big down gap from 8/15 today, so that would be a good area to trade against if you have a bearish bias, and it offers a nice risk/reward entry.