The markets were rattled late morning Thursday after reports that another substantial earthquake had rocked Japan’s Northeast region. The 7.1-magnitude quake was large, but considerably smaller on the Richter scale, which is exponential, than the 9.0 quake that rocked the region last month. Indices sold off sharply as the news of the earthquake and tsunami warnings came through the wires, but have pared a potion of those losses as there have been few reports of major damage emanating from Japan. However, the market has since turned back down and is testing lows of the day. Stocks are trading through the bottom end of the nearly two-week mini-uptrend.
While the indices got hit hard, select stocks on our radar this morning held up well amid the brief chaos. While the banks as a group have not followed through from yesterday’s bounce, Goldman Sachs Group Inc. (GS) has been on a mission today. The former clear bank leader has been stuck in a descending channel for the entire year, and yesterday began to poke its head above that downtrend. Today, GS has burst through resistance at its 50-day moving average and looks to be heading for higher prices still. Although GS did pull off on the quake news, it held more than half of the day’s gains.
Among the Chinese names we highlighted this morning, Sohu.com, Inc. (SOHU) has been the strongest today. Much like Goldman, SOHU held a solid portion of its gains after the earthquake news, but is currently surrendering more of those gains as the market heads down to lows of the day once again. Once this latest storm in the market calms, look for SOHU to be one of the first to bounce.
All bets are off in this market until the extent of the damage in Japan from the latest quake is determined. While the strength of the latest quake pales in comparison to that of the previous one, there is certainly the potential for damage to an already fragile region, especially in regards to the still volatile nuclear situation. As we saw last week, any deterioration on that front is met with panic and fear by the market. S&P’s broke the micro support of 1328-1330 when the news hit, and the next level of big importance is 1318-1320, which is where traders may look close at some of the leaders and potentially buy some stocks back.
*DISCLOSURE: Scott Redler is long REE, GLD, JPM, F, RBY, BAC, FCX, WFC, AUY. Short SPY.
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