Futures were significantly higher ahead of the stock market open this morning, after a round of better-than-expected economic data and also positive developments regarding Syria surfaced over the weekend. In fact, S&P futures were higher by over one percent, but that strength didn’t last long. From the opening print, stocks moved sharply lower, and are currently trading near the lows of the session. The overnight gap has been erased, as stocks are trading near breakeven for the day. John Boehner and Nancy Pelosi both made comments late this morning regarding the situation in the Middle East that still looms, and essentially stated that something needs to be done on the offensive. Stocks didn’t like this news, and traded sharply lower in a hurry. Since then, markets have been tying to find an intraday base. Despite the swoon, small caps continue to lead today, higher by about 0.4%. The Dow is slightly lower on the session, while the S&P 500 is higher by 0.2%. Bonds are getting hit hard, off by about 1.3% as the 10-year yield continues to creep toward 3%. Lastly, gold and silver are both very strong, and the miners are up about 1.5% for the day.
CHART OF THE DAY
Linn Energy (LINE) – The independent oil and gas company has been very weak this year, lower by about 30% since January. The shares recently reported worse-than-expected earnings and sold off sharply on that news. Since then, LINE has consolidated and worked off the oversold conditions. The shares are currently pressed against their 20-day moving average, a trendline that has capped rallies since late April. Despite its weakness, sentiment toward LINE remains bullish. Currently, there are 6 “buy” ratings versus only 1 “sell.” This creates future downgrade potential, which could act as a headwind going foward.
I like a bearish entry here with a stop on a close above 25. I would initially target a move down to 22, with 20 as a stretch target.
WHAT I’M EXPECTING
I still think markets are setting up for a push lower. Today’s intraday move must be less than inspiring for bulls, but sentiment has shifted dramatically into the bearish camp. I continue to watch 1625 and 1600 as support areas on the S&P 500. If and when there is a significant move lower on fairly heavy volume, that may set up a good buy point. Until there is some sort of panic in markets, however, I think it’s best to maintain downside bias.