Markets today are all over the place, as tech giants pull us in different directions. Apple Computer (AAPL) continues its plunge, while Google (GOOG) rallies after today’s big Facebook (FB) announcement. At 1:00, FB rolled out their new “graph search” feature, which many are considering a disappointment considering the buildup into this event. Yesterday, GOOG was hit on rumors that FB would be rolling out a new search engine, but the stock is rebounding nicely today. AAPL continues its plunge, and has broken the key psychological 500 level.
Indexes are mixed yet again today, with the Russell 2000 up 0.3%, the S&P 500 flat, and the Nasdaq down 0.5%, largely due to weakness in AAPL. Metals are bid yet again today, with gold and silver both up about 1%, while bonds are also strong, up 0.7% despite markets shrugging off the morning selloff.
What’s particularly noteworthy is how well the market has held up despite AAPL, the largest component of both the S&P 500 and Nasdaq, being in freefall since late last year. We continue to probe multi-year highs, as markets shrug off one piece of bad news after the next.
CHART OF THE DAY
Helix Energy Solutions (HLX) – the offshore energy exploration company is rebounding nicely off the 21 level and 20-day moving average after five days of selling. Although HLX has recently been weak, the company has seen a year-over-year gain of about 30%. The 20-day moving average(blue trendline) has been a good guide for HLX since last October, and today’s bounce off it provides evidence that it will be supportive going forward.
What I particularly like about HLX is the pessimism that has crept in despite the stock’s recent strength. Over the past 10 days, puts have been bought at over a 4:1 clip versus calls, and total short interest on the name has increased by 31% over the past two weeks. This recent pessimism could be the catalyst to spark a strong rally in the name. The company was upgraded by Morgan Stanley today, and other shops could soon initiate coverage on HLX, as only 4 analysts are currently covering it. I like an entry here with a target of 25, and a close below the 20-day moving average(currently 20.64) as a sign to exit the position.
WHAT I’M EXPECTING
An outsized move into Friday. Since the huge rally on 1/2, the S&P 500 has traded in about a 2% range. The overbought conditions have “worked themselves off,” and we’re poised for another leg higher into tomorrow’s big bank earnings. Keep a close eye on JPM, GS, and USB tomorrow. The numbers are important, but the reaction by each stock to those numbers is more important. Should these names rally on either strong or weak data, it is likely that we’re going to make new highs on the indexes. If the stocks have a weak reaction, I’m looking for a test of 1450 on the S&P’s.