Market Action Summary: 8/13/18


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S&P 500 overview: Wary in late August

  • Resistance at 2850: What cannot go up may go down.
  • Not many bullish catalysts before Labor Day
  • Retest of 2800 may be needed.
  • Outside day on S&P 500 today. Double-doji including Friday.
  • Global weakness = risk for big caps, financials, energy/materials, chips, emerging markets.
  • Global weakness = potentially good for small caps, retail, health-care, REITs.

Geopolitical review: No light at end of tunnel yet

  • Erdogan of Turkey/Xi of China dug in, with little signs of backing down yet. Trump has little reason to back down on either.
  • Iran: Signs of resolve cracking as Ayatollah criticizes government amid protests.
  • Autos seem to be among the biggest losers of global problems.
  • Feroli of JPMorgan: Trump Treasury Dept can still intervene in FX market by selling USD.
  • Italian budget in late September is another issue to watch as Rome cuts GDP forecasts and seeks bigger deficits.

Groups & Charts in focus

  • Pullbacks after bullish gaps: Canada Goose (GOOS), Zogenix (ZGNX).
  • Sage Therapeutics (SAGE) at 200DMA following late-2017 gap up
  • Tenet Healthcare (THC) at 100DMA, near bottom of range. Health-care (XLV) is strongest sector this quarter.
  • Sprint (S) potential turnaround/value story with domestic focus, holding April high.
  • Micron Technology (MU): Beware of bearish triangle, potential for $51 breakdown.
  • Fiber-optics, retailers, smaller e-commerce strong. VIAV upgraded by Needham today
  • Keep an eye on construction firms as less-globally exposed industrials: JEC earnings 8/6, FLR upgraded by UBS today. Nextgov sees more US govt agency spending.
  • Danger zone: Autos, materials, global, energy, mutual-fund operators, home builders (ITB).

Outlooks & calls:

  • MS: Chips at risk as inventories build. (8/9)
  • Reuters: TV stations to benefit from political ads: GTN, SBGI (8/10)
  • Australia central bank (RBA) cuts inflation outlook amid trade disputes. (8/10)
  • NRF: Raises 2018 US retail sales growth forecast from 3.8-4.4% to 4.5%. (8/13)
  • OPEC cuts 2019 global oil demand forecast amid global trade disputes. (8/13)

Options corner:

  • 8/8: Fiat Chrysler (FCAU) Sept 17 puts sold.
  • Vega: ‘V’ is for volatility.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on 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 apprised 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.