Market Action Summary: 8/6/18


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S&P 500 overview:

  • Fills January gap, holds key 2800 level
  • August 2 outside day was key session for chart watchers
  • Quiet calendar favors drift higher, but is a breakout possible in late August?

Bonds and the Fed:

  • Treasury auctions this Wednesday (10-yr) and Thursday (30-yr)
  • PPI on Thursday, CPI on Friday.
  • U.S. dollar (@DX) has rallied amid geopolitical risk and weaker data overseas.
  • Flashback 7/10: El-Erian sees only 3 rate hikes this year.

Groups in focus:

  • China (FXI), China Tech (KWEB) slide down rankings.
  • Hospitals, drug makers, health insurers climb rankings.
    • Watch Johnson & Johnson (JNJ) for 200DMA breakout. Good for options.
  • Small-caps (IWM) hold 50DMA moving average.
  • Energy sector (XLE) forming triangle.
  • Software (IGV) holding up-trend line.
    • (CRM) near 50DMA good for options.
  • Retail pushing highs as earnings approach.
    • RH (RH) holding 50DMA
    • Target (TGT), EPS 8/22. Good for options24-Aug 84 calls for earnings meltup?

Recent data mixed:

  • July non-farm payrolls miss but shows deeper strength in manufacturing. But ADP beats.
  • ISM manufacturing & services indexes miss. But trade gap, initial jobless claims beat.
  • Trade anxieties squeeze China PMIs, confidence. Euro zone GDP misses estimates.
  • Viva Goldilocks?

Bullish & Bearish analyst calls

  • Square (SQ): Buckingham neutral → buy, TP $65 → $85
    • Follows JPMorgan, Needham, RBC earlier in month.
  • Parker Hannefin (PH): Evercore ISI Inline → Outperform
    • Credit Suisse, Wells Fargo less bullish earlier in month.
  • Paccar (PCAR): Evercore ISI Inline → Outperform
  • Tesaro (TSRO): Barclays cuts → Neutral, TP $60 → $56.
  • Acadia Pharma (ACAD): Piper Overweight → Neutral. TP = $19
  • Barrick Gold (ABX) Jefferies Buy → Hold, TP $17 → $11.

Options activity:

  • 8/3: Mylan (MYL) Jan 35p-40c-50c bullish 3-way.
  • 8/2: PowerShares Trust (QQQ) 10-August 173.50 – 10-August 172 put spread.
  • 8/1: Pfizer (PFE): August 37 calls bought, December 40 covered call roll → December 41.
  • 8/1: Apple (AAPL): Diagonal spread.
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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.