Futures were largely flat coming into the morning, but legendary hedge fund manager David Tepper’s interview on CNBC sparked a fierce rally off the morning lows. On the show, Tepper declared that he is still bullish, and the market remains very cheap. As a result, the S&P 500 rallied over 20 points off its lows, and remain a few points off the highs of the session. Currently, markets are being led higher by the Russell 2000, which is up about 0.9% on the session. There is notable underperformance in technology today, as AAPL is currently off nearly 2% for the session, despite strength in equities. Bonds are weak yet again, down 0.6% today, while metals and miners are slightly lower.
CHART OF THE DAY
QUALCOMM (QCOM) – The chip maker has traded in a fairly tight range so far this year, but its performance continues to lag that of the S&P 500. QCOM has been guided for most of this year by its 50-day moving average, a trendline that it is bouncing into at present levels. Despite it lagging the broad market, sentiment toward QCOM remains very bullish. In the front three months’ option open interest, there are nearly 2 calls for every put. Additionally, short interest on QCOM is currently less than one percent of the equity’s float. Should QCOM continue to lag its peers, this creates the potential for new bears to initiate short positions, which would act as a headwind toward the equity.
I like a bearish entry here, with a stop on a close above 65.50. I would initially target a move down to 62, with 58 as a stretch target.
WHAT I’M EXPECTING
Pullbacks should continue to be bought. Today’s rally caught many off guard, as rumors surfaced yesterday that Tepper would actually talk bearishly on CNBC today, when he actually took the exact opposite view. Stick with what’s working — despite today’s big move up, there exists a great deal of opportunity on both the long and short sides of the market.