STTG Market Recap January 30, 2013

“Worst losses of the year!”  To show you how wonderful 2013 has been for the bulls, a loss of 0.4% is the worst loss of the year for the S&P 500.  While the damage was actually worse under the surface this index has been particularly strong in January.  We don’t often post the Russell 2000 chart which focuses on small caps but that index was down a substantial 1.15% to tack onto NASDAQ’s 0.36%.  Thus far this is still a very small pullback in a market that has come a long way but there are some subtle changes under the surface.  In news today, fourth quarter GDP came in at a sparse -0.1%, mostly as exports and federal government spending on defense disappointed.  Also the Federal Reserve had its announcement but there was little new there.

Today we’ll look at some of the longer term charts on the S&P 500 and NASDAQ.

The S&P 500 remains in a very healthy uptrend, although near term extended from major support.  It is within a 3rd full blown ascending channel in just over a year.

The NASDAQ still has an issue, and that is its lack of ability to get over September 2012 highs.  Hence the potential for that bearish inverse head and shoulders formation we’ve noted for weeks.  This might seem strange with the S&P 500 printing new highs almost daily but there *is* a huge divergence here between the two indexes.

I will post the Russell 2000 as well today to show how it has fared over the same timeframe; obviously much more like the S&P 500 lately but a stronger pullback of late.

While the S&P 500 is barely down, we can see the Oscillator has pulled back significantly.  Why is that?  There has been a correction going on under the surface – as one group leads, another corrects.  So while the index is strong there have been a lot of individual names taking some punishment day after day as sellers rotate through different groups.

About that subtle rotation I mentioned above – we are seeing a move into more defensive sectors of the market lately – for example, utilities and consumer staples.  Now this could just be a sign other sectors need a rest but normally these are not the leaders of a bull move.  Something to be aware of.

Oil had another strong day so is something to watch, this is the second day it has been out of its bull flag and considering the “risk off” nature of the rest of the market could be important here.

Facebook (FB) was the stock of the day in after hours on its earnings; it initially sold off some 6-7% and tried to pull an (AMZN) by reversing (which it did temporarily) immediately after but as we write it remains down 4% in after hours just below $30.  There is a lot of support for this name in the $28s now.

Facebook delivered fourth-quarter results above Wall Street’s expectations on Wednesday and sought to show that it has finally transformed into a “mobile company.”  But its stock dropped sharply in after-hours trading as investors placed more significance on the company’s growing expenses rather than on its increasing user base and higher advertising revenue.   Facebook grew its revenue and increased the proportion of revenue that comes from mobile advertising — a closely watched figure. But expenses also grew sharply. Also, the company said 2013 will be a year of “significant investments” and hiring as it focuses on long-term growth rather than short-term profits.

It is also worth showing one name we highlighted yesterday, Peabody Energy (BTU) solely for the fact how tough it has been to invest in the coal space the past year or so.  It had that big surge yesterday on earnings – but today gave it all back!  Ugly action.

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