After closing on the lows yesterday and two days worth of very ugly post-Fed price action, markets were once again weak on the open today. The cash market open was met with aggressive selling after an upward overnight ramp in futures, and equities took out their lows made yesterday afternoon. However, after a flush through those lows, there was a John Hilsenrath article that surfaced near mid day questioning if the market was misreading the Fed’s signals regarding tapering and the future of quantitative easing. As you would imagine, equities perked on the release of this piece, and stocks have rallied back into the green for the day. Currently, the S&P 500 and Dow are leading markets higher, up about 0.2% for the day. Technology is weak, as AAPL continues to slide, and the Nasdaq is off by about 0.5% at present levels. The bond swoon continues, as they’re lower by over 1%(yet again), and metals are seeing some relief after yesterday’s bloodbath. Currently, gold is higher by about 1%, while silver is 2% higher today.
CHART OF THE DAY
Saks, Inc. (SKS) – Retail stocks have been very strong this year, and SKS is no exception. Since the beginning of the year, the equity is higher by about 30%. On May 22, SKS gapped significantly higher on chatter that the company would be taken over at a premium to its market price. Since then, it has drifted lower into its rising 40-day moving average, a trendline that has served as support multiple times over the past year. On the sentiment front, SKS is very-highly shorted, with 20% of its outstanding shares being sold. This creates the potential for strong rallies going forward should any positive news surface.
I like a long entry here with a stop on a close below 13. I would initially target a move to 15, with 20 as a stretch target.
WHAT I’M EXPECTING
The flush lower near my downside target of 1575 this morning seemed a bit panicky, and I’m looking for that to mark the near-term lows for a few days. Given that 1610 was firm support on the S&P 500 for sometime, I’m now looking for a move back into that level. Once there, the reaction will be very telling as to who is in control of the markets from these levels.