Futures were strong into today’s cash market open, as the May Case-Shiller Home Prices came in above expectations this morning. However, this strength was short-lived, as stocks have slowly dripped lower from those levels. The S&P 500 peaked its head back above the 1690 level, but once again failed to make a run to take out 1700. Despite today’s market weakness, there are pockets of strength in equities, led by the Nasdaq, which is up by about 0.4% on the day. Much of this strength can be attributed to large-cap names like AAPL and GOOG. Today’s laggard is the Dow, which is off by about 0.2%, while the Russell 2000 and S&P 500 are each about 0.1% lower on the session. Bonds are trading near breakeven, and metals are slightly lower. Much of their price action going forward will largely be a result of what is said during tomorrow’s FOMC Policy Statement.
CHART OF THE DAY
Caesars Entertainment Corp. (CZR) – The casino concern has been very strong as of late, with the equity up over 130% since the beginning of the year. Last night, CZR reported earnings that missed expectations, yet the stock is still significantly higher today. This is a sign where expectations were too low into the report, and could signal continued strength going forward. Despite its very strong price action, sentiment toward CZR remains very bearish. Of the 4 analysts covering the equity, none of them have a “buy” rating on the stock. Additionally, short interest stands at over 9% of the company’s float. This creates the potential for bearish capitulation going forward, which could act as a tailwind toward the equity.
I like a long entry here with a stop on a close below 15.50. I would initially target a move back to 18, with 20 as a stretch target.
WHAT I’M EXPECTING
I’m still looking for higher prices from here, but tomorrow will likely be a “make or break” day for that thesis. The reaction to what is said in the FOMC minutes will be key. It seems that bears are getting louder and louder this week, yet markets have failed to sustain any path lower, as weakness has been met with buying on seemingly every dip. Keep a very close eye on the action at around 2:00, and be sure to adjust your risk accordingly. Key levels on the S&P 500 that I’m watching are 1700, 1680 and 1650.