STTG Market Recap Nov 13, 2012

Tuesday was a roller coaster ride for the market.  After gapping down on the S&P 500 to last week’s lows near 1370, a furious rally took the index up nearly 20 points just after 11 AM.  Then a slow descent happened the rest of the day, highlighted by a drop of 5 points in the closing 45 minutes.  In the end the market was actually down from the previous day but up from where it gapped down to.  That said, this type of action was unhealthy.  For the session the S&P 500 fell 0.4% and NASDAQ 0.7%.

The S&P 500 created a new lower low, falling to the 50% retracement of the entire June-September move on the gap down, before rallying.  It seemed like the type of action that marked a very short term bottom but it turned out to be nothing more than a head fake.

The NASDAQ also made a new low, broke some support from early August, and is in no man’s land now.  Next support comes from July’s lows.

We are now reaching oversold conditions, certainly on this oscillator in relation to the action of the past few months.  But as one can see from the readings during last spring and early summer, oversold can become even more oversold.  That said, it’s very difficult here for both bulls and bears as pressing shorts on such oversold levels can often blow up a bears portfolio on a snapback rally.

Networking giant Cisco Systems (CSCO) reported earnings after the bell and posted a beat, driving the stock up 7% in after hours to over $18.  The results were not great and the reasons for the beat were not the type you wish for in a perfect world, but the bar has been set very low for earnings.  Technology has been the most beaten down sector during this two month correction so traders will look to see what catalyst can turn this group around.  [note - chart does not display the after hours move]

  • Cisco Systems Inc. (CSCO), the biggest maker of computer networking equipment, reported quarterly profit that exceeded analysts’ estimates as price reductions helped spur sales and cost cuts kept margins intact.  Profit excluding some costs was 48 cents a share in the first fiscal quarter. That compares with analysts’ average estimate for 46 cents a share, according to data compiled by Bloomberg. Revenue rose 5.5 percent to $11.9 billion, compared with analysts’ projection for $11.8 billion.

 

On the flip side, Microsoft (MSFT) was hit hard as the chief architect of its new Windows 8 is leaving the company, leaving many to wonder about the quality of the product launch.

 

Chinese search engine Baidu (BIDU) also was decimated as worries about its dominant role in China and slowing growth rate resurfaced.

  • Baidu’s (BIDU) CEO has experienced a growing sense of crisis as the company’s growth rate has slowed and the company’s dominance in China is being threatened by some competitors who have more adeptly changed in the face of the shift to mobile, according to a Chinese language report in Shanghai’s First Financial Daily, reported Want China Times.

Tomorrow afternoon will be a release of the Federal Reserve’s minutes from their last meeting.  Traders will be looking for hints for (EVER MORE) quantitative easing – something to replace the Operation Twist program that ends in 6 weeks.  Of course, it should be clear now that the market can go down – for months in fact – during QE so hints of ever more (or bigger) of the same should not be a salve.

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