Yesterday was a great day for investors. The gains certainly did not make up for the losses in recent weeks, but it certainly was nice to have stocks moving sharply higher, especially for those who had some short-term trades on - as we ourselves did. This is a traders market right now, and it shall remain so. Soon it will be time to set up long-term trades, but it is our opinion that it is not quite that time to put that capital into play.
In economic news today we have another Jobs Thursday with Initial Claims (Consensus 375k), Continuing Claims (Consensus 3250k) and also Consumer Credit (Consensus $12.7 billion). We also have Fed Head Ben Bernanke speaking today, and the markets will be listening. There was a speech in Boston by another Fed Head yesterday and it was dovish, so everyone will be listening to see if Helicopter Ben sticks to that line or remains to his talking points of the past 2 months. This could make or break the market today, but we would bet that he is smart enough not to speak in a manner to break to anything as he should fully understand the predicament we currently find ourselves in.
Two important things for investors to note. First the S&P crossed above the 200-day moving average and secondly the Greek elections will be held June 17. That was a dose of good news with a dash of sobering news to keep it all in perspective.
Looking at Asian markets we see markets are higher:
All Ordinaries - up 1.27%
Shanghai Composite - down 0.71%
Nikkei 225 - up 1.24%
NZSE 50 - up 0.27%
Seoul Composite - up 2.56%
In Europe markets are higher:
CAC 40 - up 0.63%
DAX - up 0.52%
FTSE 100 - up 0.67%
OSE - up 0.18%
Technology
Sirius XM (SIRI) once again had low volume of 29.3 million as shares rose $0.025 (1.32%) to close at $1.915/share. The stock opened higher and never went red throughout the day which was a positive sign. It looks like the stock wants to break out of this area and move higher, but lots of resistance with price level and the 200-day moving average just above where we are trading right now. We are not sure what to make of the low volume, it could be seasonal or it could indicate that investors are on the sideline, but whatever the reason we recognize that it is not stock specific but rather market-wide.
Biotechnology
Arena Pharmaceuticals (ARNA) saw shares rise $0.18 (2.87%) to close at $6.445/share on volume of 7 million. We would like to point out to our readers that the excitement here is gone for a bit, and the volume dip and volatility highlight this. The stock is range bound now and cannot move higher until news on the approval of the company's weight loss drug and investors will not sell now until they can see the news.
Banking
Investors have really pushed JP Morgan Chase (JPM) shares down sharply over the past month in response to the revelations that the bank had a trade go bad. Shares now trade at $33.07 after having risen $1.08 (3.38%) yesterday. Volume was strong, registering at 48 million shares which goes against the lower volume trend among many of stocks we follow. Investors need to block out the noise discussing how bad the losses are going to be which are really just guesses at this point and nothing more. We see value here, and although it is not the best buy in the industry right now, we could see one selling some puts in order to collect premiums - so long as one is comfortable with shares being put to them at the price they sell the puts and believes that the general market is headed higher. If this Europe issues can get solved or begins to head down the right road at a minimum then shares will get stronger, making this a relatively good trade. This is a trade we have done before, so we speak from experience.
Manufacturing
Select Comfort (SCSS) was down 20.52% yesterday as shares fell $5.32 to close at $20.61/share. Volume spiked to 12.2 million which is about six times the three month average. Shares fell hard in sympathy with peers in the industry, which were cut in half in some cases, as investors fled from more bad news. This has been an ongoing story in the industry, and everyone is down sharply across the board, but we still see no reason to enter a trade here. Rather than a reason to invest, we find all this reason enough to stay away.
Investors also saw Halliburton (HAL) shares fall by $1.02 (3.50%) to close at $28.10/share. Volume spiked to 48.2 million, which was three times the three month average for the stock. The news that moved shares was the company's announcement that 2nd quarter results would be impacted by higher costs, specifically guar gum, which is used in the new drilling techniques. The market already expected this, but it appears that the situation is twice as bad as previously thought/estimated as the company released a revised estimate. That is never good, and it will be interesting to see how soon Halliburton can pass on these higher costs to clients. For investors, one would hope sooner rather than later.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
