US stock futures point once again to a slightly higher open Tuesday, but remain below the last major resistance area before new multi-year highs. Pivot highs sit at $134 in the SPDR S&P 500 ETF (SPY), and futures are dancing around that area this morning. A push above with volume could quickly bring new highs. The Fed’s two-day meeting could provide the catalyst to push through, and its possible that move may wait for resolution from the summit. The neckline is in place for the reverse head and shoulders in the S&P that would see a measured move to 1410-1440.
If that scenario plays out, we must give credit to another strong earnings season. Tech bellwethers have led the charge, highlighted by Apple Inc. (AAPL) last week, which brushed off supply chain concerns in Japan, index rebalancing, and concerns over Steve Jobs to post a blowout quarter and get back near all-time highs. AAPL may need a little more rest before its next leg higher, but it could lead the market to new highs.
Watch the T3Live.com Morning Call video with Scott Redler and Alix Steel below.
Yesterday, Netflix, Inc. (NFLX) was the next in line to report earnings, with the highly shorted stock (20% net float short) seemingly needing a flawless report to maintain its lofty price level. The report was strong, with solid beats in EPS and revenues, but subscriber growth fell barely short of expectations and mid-point guidance was slightly below consensus estimates. The stock did indeed turn out to be priced for perfection, as NFLX is trading off around 6% this morning. Wait for NFLX to set up again, we wouldn’t be surprised to see more strength here.
The next report to watch for is Amazon.com, Inc. (AMZN) after the close today. Last week both NFLX and AMZN came back on our radar after being a bit out of favor during 2011. AMZN was breaking out of a long-term downtrend, which provides a good risk-reward scenario for entries. Since breaking out of that descending channel, AMZN has jumped almost 3% into its report. Most active traders choose not to take stock into earnings as, again, highly valued stocks are often priced for perfection, but you never want to bet against these high growth tech stories.
No market report is complete without coverage of the Chinese Internet stocks, which continue to roar higher despite skepticism from some analysts. Last week, Goldman raised its price target on SINA Corporation (SINA) but actually shifted the stock from buy to hold because of how far it had run. The downgrade sent the stock plummeting, but strong earnings Thursday night from Sohu.com, Inc. (SOHU) boosted the entire group.
Speaking of SOHU, the stock was up sharply pre-market yesterday but pulled back in to give traders an outstanding intraday entry. The technical buy area was $102, and the stock made a nice explosive breakout before pulling back in slightly. It still appears SOHU is set for higher prices. SINA opened down three points but piggybacked the SOHY rally, closing up 5+ points for a nice negative to positive trade for short term traders. Baidu.com, Inc. (BIDU) was a little bit more restrained, perhaps waiting for earnings which come Wednesday after the close. Youku.com, Inc. (YOKU) has no real set-up, but with the market looking poised to potentially blast off, it should see higher prices. Ecommerce China DangDang (DANG) is starting to play some catch-up after being a laggard. DANG looks poised to break above a mini pivot, with the next rest area standing at $28.29. Finally, new issue Qihoo 360 Technology Co Ltd (QIHU) is seeing good volume with perhaps some fundies looking to get involved. A move to new highs above $36 could provide explosive momentum.
Rediff.com India Limited (REDF) is the hot Indian internet stock we highlighted for a breakout last week. The stock has consolidated in its upper range and once again looks poised for another breakout above $11.90-12.
Although the oil servicers have underperformed during this leg of the rally, Halliburton Company (HAL) has shown relative strength and looks poised to make 52 weeks highs. Keep this one on the radar.
Cloud computing stocks have been another area that have come back into favor this earnings season. Virtualization leader VMWare, Inc. (VMW) really kicked things off with a monster report last week followed by a 10.5% gap up. The stock has pushed higher and held right around all-time highs, a sign that higher prices are likely in the cards. Several other cloud stocks broke out also and look a bit extended, but one we recommended last week for catch-up was Acme Packet, Inc. (APKT). The stock has extended nicely to highs, but with earnings coming after the close today some traders may look to take profits. Juniper Networks, Inc. (JNPR) could be the next to play catch up, currently mired in a downtrend but looking ready to breakout with a thrust then consolidation.
High ho silver! The precious metal has seen an outrageous parabolic move, and each time you think it may finally pull in it accelerates higher. The iShares Silver Trust ETF (SLV) did 4x average daily volume yesterday (all-time record volume of 170 million shares). Last time the SLV traded this kind of volume was on November 9, 2010, which preceded a 15% correction. Scott Redler believes we could see similar type action this time around, but will not be aggressive with a short until a more definitive topping signal. For one, the dollar index has been making new lows over the past few months, which was not the case in November.
*DISCLOSURE: Scott Redler is long REDF, F, AAPL, GLD, OIH, MGM, JPM, LVS, POT, CIEN, AMZN, JDSU. Short SLV.
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