STTG Market Recap February 6, 2013

Stocks were little changed Wednesday after very sharp moves the previous three sessions.  Markets had initially gapped down which once again was in direct contrast to the previous day’s action (a sharp move up) but buyers came in most of the morning and once the markets hit flat line they stayed in a narrow range.  The S&P 500 added 0.05% while the NASDAQ dropped 0.10%.

Let’s look at the long term charts today for the indexes.  The S&P 500 remains in a superior position to the NASDAQ having surpassed fall 2012 highs and despite some increased volatility of late remaining firmly in its upward ascending channel.

The NASDAQ still is prone to a potentially bearish “head and shoulders” pattern which is strange considering the divergence versus the S&P 500.  If we are nearing the end of this move in the coming days/weeks this lack of new high on NASDAQ might be something to look back upon as a tell.

While the S&P 500 is near highs of the year the back and forth action of late has worked off all overbought conditions using the NYSE Oscillator.

Crude oil which had potentially signaled a breakout failed completely and is now back down in the previous range it had occupied.

One name that stood out today with a potential CANSLIM “cup and handle” formation is Home Depot (HD).

Two high profile companies to note reported today; both faring poorly in after hours.  First is Green Mountain Coffee Roasters (GMCR), a favorite of short sellers.  However 2013 thus far has been a year of short squeezes and many of the most highly shorted names have squeezed shorts with vicious rallies.   The stock was up 3%  ahead of earnings but is down some 8%+ in after hours on guidance that is lacking – down to the $45 area.

Green Mountain Coffee Roasters Inc., maker of Keurig brewers and single-serve pods, fell as much as 12% in late trading after forecasting fiscal second- quarter revenue that trailed analysts’ estimates.  Sales this quarter will rise 14% to 18% from a year earlier, the company said. That implies sales of $1.01 billion to $1.04 billion, trailing the $1.06 billion average of 13 estimates.  Green Mountain, which last year began selling the Keurig Vue and Rivo brewers, is seeing more competition from Starbucks Corp., which recently introduced its own single-serve machine, the Verismo.

Tech company Akamai (AKAM) is being hit to the tune of 15%+ in the after hours session down to the $35 range.  Results came in light.

Akamai Technologies Inc., a company that helps customers speed the delivery of online content, tumbled as much as 15% after sales missed estimates. Fourth-quarter sales climbed 17 percent to $378 million, the company said. That trailed the $381.4 million predicted by analysts on average.   The results showed signs of softening demand for Akamai’s services, which help customers such as news sites and e-commerce retailers speed up their online offerings, saidChad Bartley, an analyst at Portland, Oregon-based Pacific Crest Securities.  “Revenue was definitely lighter than expectations,” he said. “Growth decelerated quite a bit in the fourth quarter.” had an interesting comment on bullish sentiment yesterday; while not a fine tune instrument it is helpful in the intermediate term.  It shows almost everyone is on board to this rally.  If permanent QE has not changed the world, this does not bode well for the next 1 and 6 months.

The chart above shows an average of the recommended exposure to stocks (commonly the S&P 500) and the Nasdaq [via a survey of investment newsletter writers from Hulbert Financia]l .  The current reading of 76% is a record, tied with two weeks in the year 2000 (March 31, 2000 and July 14, 2000).  There have been a total of 9 weeks when the combined level neared 70% (a couple of them were clustered together).  A month later, the S&P 500 showed a negative return every time, a median of -3.1%.  Its maximum gain during the next month averaged only +0.1% (using weekly closes) while the maximum downside averaged -4.4%. Even over the next six months, returns were poor.  Only 1 of the 9 weeks had a positive return (+1.9%), and the median was -4.25%.  The most that the S&P rallied during the next six months averaged only +0.7%, while its maximum decline averaged -13.8%.

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