Despite rumblings of an upcoming conflict with Syria and weak price action as of late, markets are higher today. The rally is being led by high-beta names–many of which are soaring. Futures were all over the place after this morning’s better-than-expected GDP print, but buyers eventually stepped in and took the reins. The cash market open was met with aggressive buying, and stocks soared about a full percent off their lows. On the index front, the Russell 2000 is leading today, up about 1% from yesterday’s close. Bonds are also rallying, higher by 0.7%. Today’s intermarket action is opposite of the inverse stock/bond correlation that we’ve seen for the past week or so. Whether today’s move continues remains to be seen. Metals are slightly lower today, with gold 0.3% lower and silver off by 1% on the session. Despite today’s move higher in stocks, volatility is seeing a bid and is modestly higher, likely a result of the Syrian situation.
CHART OF THE DAY
Ventas, Inc (VTR) – The real estate investment trust has been weak this year, lower by about 3% despite soaring earlier in the Spring. REITs are very sensitive to interest rates, and the recent spike is undoubtedly having an adverse effect on share price. VTR recently broke to a new 52-week low and is bouncing back near 63, site of former support. Despite its weakness, sentiment in the options market remains very bullish. In fact, there are nearly two calls in the front three months’ open interest for every put. This indicates excessive optimism, and could cause a bearish unwind should VTR continue to move lower.
I like a bearish entry here with a stop on a close above 65. I would initially target a move back to 59, with 50 as a stretch target.
WHAT I’M EXPECTING
I still think the bears are in control and we’re headed down to 1600 on the S&P. Today’s bounce was strong this morning, but we’re faltering around the key resistance zone that I’ve been watching. There is a tailwind in the market today and tomorrow, as month-end window dressing could be putting a bid underneath it. I would surmise that next week’s action will be very telling, and give more clarity as to the next major move. Unless there’s some major news today or tomorrow regarding Syria, I’m sitting tight until next week.