The market has continued to slide Monday after opening marginally lower as investors take some profits following large gains last week. Earnings from tech bellwethers pushed the market to big overnight gains Wednesday and Thursday. Last week the market could not break above the last resistance area on the SPDR S&P 500 ETF (SPY), which stands at around $134, and this morning once again could not breach that level. Now it seems there could be some sideways type action before the next leg higher.
The Chinese Internet stocks have reprised their role as market leaders today after a stellar earnings report from Sohu.com, Inc. (SOHU) ($1.13 vs. $0.96 EPS and $174.4 vs. $168.8 revenues). SINA Corporation (SINA) had been the stronger of the two before a downgrade from Goldman Sachs Group Inc. (GS) last week, and now SOHU has taken the mantle. The stock was up sharply pre-market before pulling off, but investors have aggressively snapped up shares intraday to push the stock higher. SOHU is up more than 11% on the day, while SINA has also gone negative to positive (currently up 4.2$) on its cousin’s great numbers.
The precious metals pulled off early but are bouncing back into the lunch time hour. After opening more than 3% higher, the iShares Silver Trust ETF (SLV) traded sharply lower in the first hour, filling the gap and then some. The SPDR Gold Trust ETF (GLD) also filled its overnight gap. However both have bounced back above Thursday’s close and look to have their sights set back on previous highs. While some traders were able to capture a quick short this morning, it’s most prudent to keep hands off silver on both sides of the trade.
The fertilizer stocks have had some corrective action this morning but still look in the game for higher prices above their moving averages. CF Industries Holdings, Inc. (CF) has remained the strongest, holding up best today after an explosive move on Thursday. PotashCorp./Saskatchewan (POT), which holds the largest market share in the phosphate and potash industry, still looks good despite weakness this morning. Again, as long as POT holds above its moving averages it should still see higher prices in the coming weeks.
Select cloud stocks have also been strong this morning, with Morning Call pick VMWare, Inc. (VMW) looking poised to make a big secondary breakout move after a big earnings gap last week. The former market leading stock had performed poorly in 2011 until its blockbuster report last week, and looks in the game for higher prices at this stage. An intraday flag should provide a nice entry above $98.50 for the breakout.
*DISCLOSURE: Scott Redler is long JPM, POT, GLD, AMZN, JDSU, LVS, REDF, CIEN, MGM, OIH. Short SLV
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