STTG Market Recap February 7, 2014

Here we go again?  As we mentioned the past few days we have been in a pattern for over a year now in the NASDAQ where there has been an enormous uptrend, broken briefly by falling out of the bottom of that pattern for a few days every so often.  This was the first time we have seen it since last October.  Each time it happened in 2013 we had a ferocious snap back "V shape" rally, and thus far we might be beginning a new one in 2014 over the past 2 days.  Despite a strange jobs report in which non farm payroll came in well below expectation for a second month in a row, but the unemployment rate fell buyers came in hot and heavy.  The S&P 500 gained 1.33% and the NASDAQ 1.69%.

The government reported the creation of 113,000 jobs in January versus expectations of 185,000. The jobless rate fell to 6.6 percent versus an expectation of 6.7 percent. The report showed increased employment in construction, and declines in retail and government work.  The payroll number is "even lower than the lowest estimate. Mitigating some of these negatives is the unemployment rate ticked a bit lower and the labor participation rate ticked up." said Chris Gaffney, senior market strategist at EverBank.

Both the index charts show interesting action.  While the October puncture of the major trend line in the NASDAQ was only one session the prior two were very similar to the 2014  version, 3-4 sessions.  Then furious rallies followed.

nasdaq

With the S&P 500 we had a bear flag (marked in blue) followed by a major downturn Monday.  But today's rally has now pushed the S&P 500 right back to the top of the bear flag and rubbing against one of the 2 major trend lines in purple.

spx

Emerging markets, which had been the source of this selloff, have also had a nice 2 day rally.

eem

It is worth noting the move today in oil - while this has been in a bearish pattern, we now see it at the top of this recent range.

wtic

In individual stock news travel site Expedia (EXPE) reported earnings and surged.  The company announced a better than expected earnings of 92 cents a share which beat estimates by 6 cents while revenue grew 18 percent to $1.15 billion beating estimates of $1.13 billion. The company reported a 21 percent growth in bookings.

expe

We mentioned earlier in the week that you want to keep an eye on stocks that held up well during the correction.  While they would weaken if there was a deeper correction, the ones that hold up the best usually are leaders of the next move up - you can see that sort of reasoning in Netflix (NFLX) and Tesla Motors (TSLA) today; 2 names we highlighted mid week as strong.

nflx tsla

Have a good weekend and we'll see if this volatility slows down next week.