STTG Market Recap July 10, 2014

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Indexes in the U.S. opened down sharply this morning, following European markets which had suffered as some worries suffered about a major Portugal bank.   However dip buyers showed up yet again to take advantage of the swoon and stocks finished well off their morning lows.  The S&P 500 fell 0.41% and the NASDAQ 0.52%.  As we always say whenever news events strike, technical analysis is a guideline of probability that operates quite well in a vacuum of heavy outside influences.  When there is a major news event or a series of them that truly worry investors things can change on a dime – see all the crisis of the past 7 years.  But generally if this is a modest event things will return back to normal quickly.

Espirito Santo Financial Group, the largest shareholder in Portugal’s Banco Espirito Santo, suspended trading in its shares and bonds, citing “material difficulties” at parent company ESI. The bank’s shares tumbled 17.2 percent. Portugal’s benchmark stock index fell 4.2 percent.

The NASDAQ briefly fell below those March highs but finished back above them.  The S&P 500 simply looks like an index that was asking for a pullback late last week…and received it.

spx

nasdaq

We mentioned the action in copper a few days back.  Thus far it has held this breakout nicely and looked to be flagging.  If it can break out from this that would send a generally positive message as strength in copper usually indicates either a pickup in global economic activity and/or a pickup in China who buys a huge proportion of the world’s commodities.

copper

One area we don’t speak much of, but has seen some relative strength of late are real estate trusts.  These throw off some income generally and are a way to people to generate some in a very low risk environment.  REITs can be found in all parts of the economy – commercial, industrial, healthcare, etc …below are 2 of the major ETFs where you can buy a basket of major names at once: VNQ and IYR.

vnq iyr

There were some bad reactions in early earnings season action -

Lumber Liquidators (LL) plunged 21.5 percent after the hardwood flooring retailer cut its earnings outlook.  Anyone who had even the basics of technical analysis could see this was a stock in downtrend that had NOT reversed upward like a huge proportion of stocks did 6-8 weeks ago.  Therefore “someone knew something”…and that something came today.

ll
Sandwich chain Potbelly Corp (PBPB) estimated second-quarter revenue and profit below analysts’ expectations and its stock plummeted  25 percent, just above an all-time low of $10.91.  Here is another stock which also barely rallied during this extensive market spike – other than a few days about 3-4 weeks ago it has asked poorly.
pbpb
Tomorrow we kick off the meat of earnings season with a name such as Wells Fargo (WFC); Blain wrote an excellent piece on how to prepare for earnings season – 5 Easy Steps to Navigate Earnings Season Better than the Pros.

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