Markets are skiddish today, as there continue to be growing fears over the prospect for war in the Middle East. Secretary of State John Kerry addressed the world around 1:00 today, and made it clear that something must be done regarding the recent chemical attacks by Assad on his people. However, at the end of his speech, he declared that a solution must come from the UN, and it must be done at the negotiation table as opposed to on the battlefield. The final message was a bit unclear as to the next course of action, but markets see-sawed back and forth as his address was happening. Stocks are off the lows from the beginning of his speech, but still lower on the day. Currently, the Russell 2000 is today’s relative laggard, off 1.2% for the day. All other equity indexes are lower by about a half percent. Bonds are catching a bid, up 0.4%, while metals are slightly lower on the day. There continues to be a bid in volatility, as the VIX is nearly 4% higher at present levels.
CHART OF THE DAY
Seagate Technology Holdings (STX) – The electronic storage manufacturer has been strong for most of the year, but recently disappointed on its earnings numbers. After making new all-time highs, the expectations were in the clouds, and STX failed to deliver. Although it has been sliding as of late, the shares recently filled a gap higher from the previous quarter. This area could act as support going forward. Despite its strength, sentiment toward STX remains lukewarm. Currently, only 4 of the 21 analysts covering it have the stock rated as a “buy.” Additionally, shorts remain prevalent, as it would take about 6 days to cover all outstanding bearish bets. This creates the potential for future bearish capitulation, which could act as a tailwind going forward.
I like a long entry here with a stop on a close below 36.50. I would initially target a move back to 42, with 45 as a stretch target.
WHAT I’M EXPECTING
So long as uncertainty persists, it will be tough for the market to mount any sort of significant rally. There are now numerous geopolitical and fiscal risks that are lingering, and it may take some time for the fear to subside. I continue to believe the first test of major support will come around 1600 on the S&P 500, and it is very possible that markets could trade in a choppy range for the forseable future.