The market made new highs early, but only briefly, as stocks are pulling back into the lunch-time hour. Yesterday’s FOMC rate decision and testimony from Fed Chairman Ben Bernanke boosted stocks, but the markets have been unable to follow through with any momentum after a large two-week run up. Some rest or downside action would be healthy here, and traders are taking risk off the table today with that in mind.
Tech earnings have been the catalyst for the rally since the start of earnings season, but today we saw one of the first examples of investors selling off a strong report with Baidu.com, Inc. (BIDU). BIDU beat on EPS and revenues, and looked like it wanted to go higher early like we saw with Amazon.com, Inc. (AMZN) and Sohu.com Inc. (SOHU) previously. However, BIDU has instead turned lower, testing yesterday’s low (down almost 2%). This is further evidence that some of the momentum of this move may be exhausted in the short term.
Rare earth stocks have been strong today, with group leader Molycorp, Inc. (MCP) up 3.2% on the day. The sector remains very speculative but China continues to reaffirm export quotas which are the catalyst for the North American producers run higher. Avalon Rare Metals (AVL) has been mooted as a possible takeover target in the group, and it is up
1.6% today.
Gold and silver continue to squeeze shorts and made another new highs this morning before pulling off. The run for these precious metals has been astounding, but one must wonder how long they can last. Some traders are starting to once again contemplating shorts in silver because of the perceived risk-reward of that trade. Silver remains up about 1% on the day while gold is flat.
There are not a lot of compelling charts out there right now until the market tips its hand to its next move. After a big run many momentum stocks are extended, but most are not yet setting up for potential shorts. Be patient at this stage.
*DISCLOSURE: Scott Redler is long GLD, JPM, CIEN, WFC.
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