STTG Market Recap July 31, 2014

Thursday was the first very truly rough day in a long while for the indexes but it should not have been a major surprise.  If you have been reading our recaps we had been mentioning how the indexes were being held up by some big names but under the surface breadth was weakening.  Further the NYSE McClellan Oscillator has been negative all month which is another sign that the market is being carried by fewer names.  Of course that need not lead to a significant decline but periods like this are more for sniping with individual stocks rather than expecting a “rising tide lifts all boats” approach that we had in June.   Today’s culprit seemed to be Argentina which defaulted on its bonds.  This seems to happen every 15 years in that country.  The S&P 500 fell 2.0% and the NASDAQ 2.09%.

We mentioned a potential bearish “double top” (which is simply when a stock/ETF/index reaches a high, pulls back, and then retests that high and fails) in the NASDAQ earlier this week and right now that looks the case.  We also mentioned a potential double top in the Russell 2000 last week.  Further we said yesterday the S&P 500 is a very simple pattern right now, if it breaks its top level support line you have to be cautious.  It did that today in spectacular fashion.

spx nasdaq  rut

I am not clear if this reading for the NYSE McClellan Oscillator has been updated by – one would assume a much larger drop today if it has been so take this chart with a grain of salt; the reading might actually be much worse.


Oil was smashed today so this is another “risk asset” that took it on the chin – it was not just stocks.


We have highlighted the emerging markets ETF repeatedly this spring and summer and said recently it was overdue to pullback as it was in the stratosphere.  The recent pattern has been to bounce off the 20 day moving average on its pullbacks – well that pattern was likewise broken today so another warning sign.  When recent leaders begin to exhibit weakness it tells you something – we saw the same thing from the transportation index earlier this week.


Housing stocks have been obliterated of late as seen by the ETF ITB.


After the close 2 favorites with the retail investors community reported.

First, LinkedIn (LNKD) is up 7% in the after hours post earnings as it repeats success we’ve seen of late with Facebook and Twitter.

Corporate networking site LinkedIn Corp  forecast better-than-expected adjusted profit and revenue in the current quarter, helped by a rapid rise in its hiring business.  The company forecast adjusted earnings of about 44 cents per share and revenue of between $543 million and $547 million for the third quarter ending September 30.    Analysts on average were expecting a profit of 40 cents per share on revenue of $540.86 million.

LinkedIn posted a net loss attributable to common shareholders of $1.0 million, or 1 cent per share, compared with a net profit of $3.7 million, or 3 cents per share, a year earlier. Excluding items, LinkedIn earned 51 cents per share.  Revenue rose to $533.9 million in the quarter ended June 30 from $363.7 million a year earlier.  Analysts on average had expected a profit of 39 cents per share on revenue of $510.98 million.


Meanwhile Tesla Motors (TSLA) is little changed in after hours post earnings.

The company reported a loss of $61.9 million, or 50 cents per share, compared with a loss of $30.5 million, or 26 cents per share, in the same quarter a year ago.  Earnings, adjusted for stock option expenses and lease accounting, came to 11 cents per share. That was 7 cents higher than Wall Street expected. The company said revenue nearly doubled to $769.3 million from $405.1 million in the same quarter a year earlier. But it missed Wall Street’s forecast of $801.9 million.  Tesla said it spent more on engineering for its Model X SUV, which is scheduled to go into production early next year.


Whew! A very busy day.


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