Prior to a round of economic data this morning, gold was off sharply. However, the release of weak PPI and retail sales data further exacerbated the move lower, as gold futures are currently trading near the key psychological 1500 level, down nearly 4% on the day. In addition to these weak data points, Ben Bernanke spoke earlier today and made no mention of continued stimulus by the Fed. Metals markets interpreted this negatively, as a lack of continued printing would result in a higher U.S. Dollar, and thus lower commodity prices. That weakness has bled over into equity markets, albeit not nearly as much as seen elsewhere. At present levels, the Russell 2000 is today’s big loser, down 0.6% on the day, with the S&P 500 off about 0.5%. The Dow and Nasdaq are today’s relative winners, each checking in about 0.2% lower for the session. Bonds are strong yet again, up 1.5% on the day.
CHART OF THE DAY
First Solar (FSLR) – After an extremely weak period of about three years, starting in mid-2008, FSLR is showing signs of strength again. The equity is about 20% higher year-to-date and nearly 70% higher over the past 52 weeks. The company recently raised its guidance for the full year, and the stock soared on that news. Despite this recent strength, skepticism still exists, as over 27% of FSLR’s float is sold short. This continued high level of short interest creates the potential for more strong short-covering rallies like we saw earlier this week.
After spiking above the 40 level, FSLR has pulled back near 36, site of former resistance and the highs from February. This level should act as support going forward. I like a long entry here with a stop on a close below 36. I would initially target a move back to 40, with 50 as a stretch target.
WHAT I’M EXPECTING
Until we can see a serious break of the 1550 level on the S&P 500, I continue to look for higher prices. Today’s minor selloff is only a blip on the radar, and dips should be bought until further notice. That said, you can still find weakness in certain sectors to hedge your long portfolio. Next week is options expiration, and it should be an interesting one given the slew of economic data on tap and today’s bizarre intermarket action. Volatility remains very low, so be sure to protect your big long positions.