US stock futures are pointing to a lower open Thursday as oil continues to track higher amid North Africa/Middle East worries. Yesterday the market fell sharply in the morning before paring those losses in the afternoon, with a few beaten down stocks and sectors even going green. Stocks largely shrugged off the protests in Egypt, but further spreading and escalation of unrest in oil-rich countries has caused investors to take caution.
This market should be traded with caution by active traders, says Marc Sperling of T3Live.com. Midday yesterday we became oversold on the short term and a lot of the former leaders got solid bounces. With some of the moves we got at lunch time, you would think the market went close to green on the day, but the bounce was actually fairly feeble. There were nice short term trades, but the jury is still out on where this market wants to go on a swing basis. During this correction, Sperling believes you will be able to trade the extremes in both directions. The S&P held the lower trendline of the uptrend from September, so we will watch to see if the index holds that level again.
The trading highlight intraday yesterday came from the agricultural stocks. The sector has been the hardest hit during the correction as investors take profits, but around lunchtime they started to pull into buy areas. The weaker ones like CF Industries Holdings Inc. (CF) and The Mosaic Company (MOS) dipped well below 50-day moving averages, while PotashCorp./Saskatchewan (POT) pierced just below it. All of these ags rallied to go green after being down big in the morning.
Tech and market leader Apple Inc. (AAPL) continues to be pressured with Steve Jobs health worrying investors. The stock held big support at the 50-day moving average yesterday, and could bounce back into the $350 area. Two other tech stocks to watch for an oversold bounce are JDS Uniphase Corporation (JDSU) and Netflix, Inc. (NFLX), says Sperling.
*DISCLOSURE: Scott is long JPM, AAPL, GLD; Short SPY. Marc is long NFLX, POT, AGU, MOS, JDSU.
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