February retail sales data was released before the open this morning, and the numbers surpassed expectations. As you might guess, futures spike higher on the news. However, since then buyers and sellers have been in a seesaw battle, but buyers have pushed markets slightly higher since then. At current levels, markets are modestly higher, with the Russell 2000 leading, up about 0.4%. The S&P 500 and Nasdaq are both about 0.1% higher on the day. Bonds were weak late this morning, but a 10-year note auction at 1:00 EST saw higher demand than expected. Some 0.6% off the lows, bonds are now only about 0.1% lower on the day. Metals are down about 0.5% and miners have continued their trend lower after a short-term bounce, down about 2% on the day.
CHART OF THE DAY
Suncor Energy (SU) – SU is an integrated energy company, and while most other names in that sector have been on a recent tear amid higher oil prices and refining spreads, SU has grossly underperformed the market for some time. Since the beginning of the year, SU is lower by about 8%, and is off by about that same amount over the past 52 weeks, a period of significant broad market strength. SU recently broke support at the 31 level, which should now act as resistance.
Despite its weakness, sentiment toward SU remains very bullish. Of the 12 analysts covering the equity, all have it rated a “buy.” Additionally, sentiment in the options market is very bullish, with nearly 3 times as many calls as puts in the front three months’ open interest. Continued weakness by SU could cause these bulls to capitulate, which would act as a headwind toward the shares. I like an entry on a short position here with a stop on a close above 31.50. I would initially target a move to the 29 level, with 27 being a stretch target.
WHAT I’M EXPECTING
Not a whole lot. Today’s retail sales number was a big data point, yet we’re only marginally higher. Expiration weeks have historically been very slow, and the intraday ranges so far this week are evidence that this could continue. That said, all of the data points over the next two days offer some potential for volatility.