today’s tape

The US banking sector remains persistent in trying to destroy the global economy and and equity markets.  This week alone JPM had its rating lowered by Moody’s and BAC requested another $20 billion from the government.  BAC, appears to be following the path of C.  It now appears BAC did little in the way of due diligence before acquiring MER.

The XLF is not from from it’s November low, but the overall market is still trading much higher.  With the VIX still trading in the $40’s, we have yet to see volatility return to the level we witnessed just 3 months ago.  If the weakness in the financials continue to spread to the rest of the market we could see another washout to the downside.

Oil remains in the mid $30’s yet the integrated names are holding up well.  A couple months ago I recommended a short RIG long XOM pair trade that worked well.  Watch the $75 support on XOM.  If this level is broken, watch for all energy names to fall.

But for now, there is a group of energy stocks that are starting to take off.  The refiners, having been beaten down for so long are coming back into favor.  TSO, SUN, VLO and HOC are outperforming every other sector at the moment.  The has also been heavy call buying the past few weeks in these names.

It will be interesting how the market reacts to Obama’s first week in office, but I suspect the health financials will remain in focus, as will deteriorating earnings.  Other than oversold bounces, I don’t see this market moving higher.  I think the best you can hope for is trading range that limits the downside selling pressure.

future stock to watch

On Wednesday I mentioned the recent strength in the refiners.  WIth lower oil prices, margins are sure to improve for stocks like TSO.

The stock has established a nice base around the $15 dollar level and call buying has picked up of late (the same can be said of VLO).  And if we take a longer term view of TSO the five year chart will show $15 appeared to be major resistance during the second half of 2004.

The recent price action in TSO, VLO, HOC, FTO and SUN suggests the bottom may be in for the refiners.

future stock(s) to watch

Crude oil broke out above the $110 level after today’s inventory report.  The long commodities, short equities trade continues to be the best investment strategy.  You can own both the USO and UNG while you short the RTH, XLF and other weak ETFs.

future stock to watch

I’m starting to like the price action in the NDX as the larger cap technology names are now showing real strength.  One of the main laggards in this group has been MSFT because of a potential YHOO buyout.  However, the takeover is looking ever more unlikely as the Wall Street Journal reported MSFT won’t raise its current bid. This is good news for MSFT stock, and it may allow additional appreciation up to the $33 November support.

future stock to watch

LEH traded lower in the final 90 minutes of trading today; and after the bell the company announced it will offer $3 billion in convertible shares.  This will only create more whispers about the LEH viability to remain alive.  This is why you can’t own financial stocks.  And compare the final 90 minutes of LEH versus a random miner like RIO.

LEH puts could become very profitable if the company suffers the same fate of BSC.

future stock to watch

China’s stock market has struggled leading into the summer Olympics held in Beijing.  The FXI has rallied over the past 6 days, but it faces strong overhead resistance at the $140 level.

In July of last year, the $140 level was stiff resistance, and it became strong support until a few weeks ago.  In fact, from mid January until mid March the FXI did trade below the $140 level – seven times – but the ETF never ended a session below this level.

But the downtrend of China’s market eventually continued, and the FXI traded all the way down to $120.  The ETF has rebounded to $137, and will now face the $140 as resistance yet again, along the 30 day moving average.  It may be time to short LFC, CHL, ACH, JRJC or other Chinese stocks.

future stock to watch

The price of crude oil was one of many commodities to suffer large losses last week as money began flowing into the financials after the FED reduced interest rates again.  But oil has steadied near the $100 level.  The USO has held the $80 support and may fully rebound up to the $110 level (or beyond) if tomorrow’s inventory report is bullish.

Despite the lastest action from the FED, we haven’t exited the “long commodities, short the financials” phase of this market.  And if the price of oil (and other commodities – GLD, SLV, DBA, KOL, UNG) continue to rebound, equities will likely retrace to their lows.

future stock to watch

Many large cap technology names in the NDX were able to hold firm this past week as the market collapsed.  The 1700 level on the NDX acted as support Friday, but if this level is broken we could see another large drop.

From the above graph, the 1700 – 1750 level was resistance in April and October of 2006 and then support from November of 2006 until the Spring of 2007.  If the NDX closes below the 1700 level on strong volume this week, the NDX  – along with the rest of the market – will likely crash another 15%.

future stock to watch

Though the current bear market picked up steam at the end of last week, dropping the major indices back into their current trading ranges, many stocks were able to break out higher during February. I’ve written about the commodity related names; and these groups remain the best buys – though you should expect some turbulence in the very near term.

Another sector you should monitor as a bullish trade are the dry bulk shippers. Because the dollar is hitting new lows everyday, exports are the one bright spot of the US economy. But many shippers have the added bonus of being located overseas, and this has aided the performance of names like DRYS.

The entire sector bottomed in mid-January (with the rest of the market), but DRYS was able to gain about 80% ($50 to $90) in a few weeks as the market remained range bound. As the market continues to slide, watch DRYS to see if it can hold the $70 support level. If the major indices don’t break down to new lows, DRYS may regroup for another run.

future stock to watch

One of the sectors I am bullish on is retail. But given the range bound trading we can’t seem to break out of it’s prudent to find a stock that is falling to offset a (hypothetical) bullish position in KSS or JCP. So today, I bring your attention to UA.

UA was crushed in mid January, but the January FED rate cuts helped beaten down stocks recover swiftly. Now that the affect of the cuts have warn off, UA may be on track to continue its torrid down trend. UA was down 6% today on strong volume and could crash back below the $35 level if the market’s next move is down.