STTG Market Recap January 31, 2014

Stocks finished the first month of 2014 worse than any month in 2013.   In fact, it was the first loss of any kind for a month since August.  In a way this is not surprising as most entered the year extremely ebullient and when everyone is happy that means too many people are on the same side of the boat.   Add to that another parabolic rise in the market late in 2013 and no one able to identify one problem area in the world and the conditions were set in place for some downside surprises.   Friday was a good symbol for the entire past week, which has been incredibly volatile.  Stocks opened down sharply at the open, spent the day working back to flat until about 3 PM, and then a late day selloff hit taking away about half the gains from the previous few hours.  The S&P 500 fell 0.65% and the NASDAQ 0.47%.  The next few weeks will be interesting as each time the market was down 3-5% in 2013, we had a V shaped move right back up as buyers overwhelmed sellers.

Here are some longer term charts of the indexes - we'll continue to focus on the NASDAQ first as it has had the much cleaner pattern.  One can see in just a matter of a week it has moved from the top of its channel to the bottom.

nasdaq

spx

The 10 year Treasury rate fell down to the 2.6%s range even as the Fed cut back on quantitative easing by $10B a month, signaling unease and a flight to safety.

tnx

One area of caution if there is not a quick rebound next week is we are starting to see a formation called a "bear flag" forming on quite a few sector charts - here are the financial and industrials.  In this sort of pattern we will see a pattern of sideways zig zag action as we work off near term oversold conditions and a new leg down will follow.  Now to be clear, anticipating this to happen has been wrong wrong wrong throughout 2013 but at some point old school technical analysis to the downside (and not just the upside) will work again.

xli

xlf

That said, you always want to look for relative strength during selloffs and one area curiously holding up quite well are the housing stocks...here is their ETF: ITB.

itb

One individual name which we didn't highlight yesterday in terms of earnings is Wynn Resorts (WYNN) which has a very large Asian exposure.

Profit increased to $2.27 a share, excluding items, compared with the $1.75 average of 22 analysts’ estimates compiled by Bloomberg. Revenue gained 18 percent to $1.52 billion, the Las Vegas-based company said in a statement yesterday. Analysts on average had projected $1.44 billion.  “Results were primarily driven by strong mass market revenues in Macau, which we view favorably, given that it is a more stable and higher-margin business,” said John Kempf, an RBC Capital Markets LLC analyst, in a research note.   Sales in Macau, Wynn Resorts’ biggest market, rose 25 percent to $1.12 billion in the quarter. Gambling industry revenue in the enclave, the only part of China where casinos are legal, increased 24 percent in the quarter to $12.5 billion, according to the Gaming Inspection and Coordination Bureau there.  The company’s Las Vegas business posted a 2.4 percent gain in revenue to $400 million.

wynn

Well it has been an exhausting week with the daily whip saw action; we'll see you back here next week and observe if these emerging markets calm down to some degree.