It appeared that this morning’s weakness could finally lead to some significant downside, but buyers have stepped in and once again pushed stocks back to their highs of the day. Markets sold off sharply in the first hour of trading, and the S&P 500 broke the 1690 level for the second day in a row. However, that weakness didn’t last long, as stocks are currently challenging their highs of the day. Today’s action is being led by technology, as the Nasdaq is trading about 0.5% higher. All other indexes are lagging slightly, but still all higher by between 0.3 and 0.4%. Bonds are also green with stocks, as the initial weakness after the 1:00 30-year bond auction was bought. Presently, they’re trading higher by about 0.3% on the session. Metals and miners are sharply higher today, with gold up by nearly 2%, silver almost 4%, and miners rallying a staggering 6% for the day.
CHART OF THE DAY
Oracle Corp (ORCL) – The database software concern has been weak for much of this year, trading slightly negative despite broad-market strength since January. ORCL recently reported worse-than-expected earnings, and the stock gapped down significantly. Since then, shares have reverted to the mean and filled that earnings gap, which could act as resistance going forward. Despite its weakness, sentiment toward the equity remains positive. Currently, 21 of the 31 analysts covering the equity have it rated a “buy,” with only one rating of “sell.” Should ORCL continue its trek lower, this creates the potential for future downgrades, which could act as a headwind toward the equity.
I like a bearish entry here with a stop on a close above 34. I would initially target a move back to 32, with 30 as a stretch target.
WHAT I’M EXPECTING
More choppy action. August is notorious for a boring market, and this is no exception. Assuming we don’t get any sort of catalyst in the near future, I’d look for the S&P to remain in the 1685-1710 range. Next week is options expiration, and there are a decent amount of economic data points to hit the tape, so the range could potentially break then on any big surprises.