US stock futures are holding mostly steady Thursday after surging higher following the FOMC rate decision and Ben Bernanke press conference yesterday. Bernanke stuck to his usual script, saying the pace of the US economic recovery is moderate, that inflation is a growing but not yet urgent concern, and that the Fed will continue to roll over maturing bonds but will not initiate a third round of large scale asset purchases (yet). The markets, especially commodities, cheered news that the committee will continue to adopt a policy of low interest rates for the forseeable future.
As mentioned, commodities surged as Chairman Bernanke spoke, with silver making new all-time highs. The iShares Silver Trust ETF (SLV) had pulled in hard after all time record, climactic-type volume on Monday, and the most stubborn of shorts finally got a breather. But as it turns out, a quick breather was all it was. Silver yesterday squeezed more shorts on its way to new all-time highs, and has continued higher overnight. Gold, which has become somewhat of an after-thought amid silver’s historic run, broke out yesterday as well with a big move, and is also higher overnight. At this point shorts should have learned their lesson, but its also tough psychologically to chase these extended moves.
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Yesterday, two commodity sectors we listed as potential catch-up plays got smoked in the morning, but were able to pare losses in the afternoon following Bernanke’s testimony. The fertilizers, especially industry leader PotashCorp./Saskatchewan (POT), plummeted, with POT down more than 5% at one point of the day. Potash reported earnings this morning, and the results were overwhelmingly positive in keeping with our long-term bullish view of the sector. The company report EPS of $0.84 vs. $0.79 consensus estimates, while revenues came in just above expectations at $2.02B vs. $2.01B expected. The EPS represented a 71 percent jump from the year ago period. POT is up more than 1% in the premarket and will interesting to watch off the open.
The other sector that looked like it would bounce off moving averages yesterday was the oil servicers, represented by the Oil Service HOLDRs ETF (OIH). However, like POT, the OIH dropped like a rock through its moving averages, filled a big gap up from last week, but rallied in the afternoon. It appears investors are eager to buy up commodity stocks with inflation expectations increasing, and the fact that OIH was able to bounce so precipitously is a bullish sign, even if the morning sell-off was troubling. It will also be an interesting sector to watch in the coming days.
Tech sector earnings have driven this recent rally back to multi-year highs, with Amazon.com, Inc. (AMZN) the latest stock to blast off yesterday. AMZN came in light on EPS but that was because of special spending to enter the cloud computing race, a fact cheered by investors. The stock closed up nearly 8% yesterday. Now lets take a look at the rest of the stocks in the group.
Apple Inc. (AAPL) continues to hold the earnings gap, and Scott Redler is wondering how many days it will have to flag before it tries for new highs? It is healthy for market leadings stocks, like AAPL, but so far the market has been able to remain strong despite resting AAPL. If AAPL makes another move, watch out on a break of $352-354.
Netflix, Inc. (NFLX), despite constant fears of a viable competitor, continues to be resilient. A mixed earnings report sent NFLX tumbling off highs, but it bounced hard off its 50-day moving average yesterday. It still seems like NFLX sees $260 before it ever sees $200.
Baidu.com, Inc. (BIDU) is up only slightly after a merely decent earnings report, but traders will be watching it off the open. A few of the Chinese Internet stocks have gotten hit recently following downgrades from Goldman (SINA Corporation (SINA) and Youku.com Inc (YOKU)), while Sohu.com Inc. (SOHU) has been strong. If BIDU gets above $153-155 and holds, shorts will be in trouble
In the cloud sector, Acme Packet, Inc. (APKT) did not blast off overnight following its earnings report like some of the other cloud stocks like VMWare, Inc. (VMW), but waited for the following day to break out. Those clean breakouts after earnings have been the best trades this earnings season from the likes of SOHU, AMZN, and now APKT, and we will continue to look for those.
Salesforce.com, Inc. (CRM) often acts very sloppy, but still hangs tough. The stock is starting to look like it could break higher out of a mini downtrend, and above $142.50 could get some momentum.
Speaking of VMW, the stock is holding its upper level consolidation, and the longer it hangs up there the better we feel about another leg higher. Technically you can initiate a position or add above $99.
The casinos are worth a mention at this stage, although each stock has a very different set-up and composure. Wynn Resorts, Limted (WYNN) is by far the strongest casinos stock, and is tightening in an upper level wedge pattern following a stellar earnings quarter. If it can get some volume to the upside early if could make an explosive move above $148. One of the laggard casinos, Las Vegas Sands Corp. (LVS) is starting perk up a bit but has been stuck in a tight base over the last week. Although it lags, the pattern looks good for a move to the $48-49 area before earnings.
*DISCLOSURE: Scott Redler is long JDSU, CIEN, WFC, GLD, JPM, LVS, AAPL, GIGM.
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