Market Action Summary: 12/17/18


S&P 500 Overview: Further Downside Risk

  • 2620 level broken, little clear support above 2500 area from August, September 2017.
  • Sector performance shows risk-off: Transports, small caps, materials weak.
  • Potential for bearish “window dressing” into year-end.
  • March 1 China tariff deadline is now reason for waiting to buy stocks.
  • Rotating selling (REITs today) suggests broader liquidations under way.
  • Lipper shows record $46 billion of outflows.
  • S&P 500 on pace for worst quarter since Q3 of 2011.

Economic data shows some risk…

  • NAHB housing index craters to 3+ year low as everything slows.
  • Empire index slows sharply, missing estimates. New orders weak.
  • Still, employment strong. Italy budget crisis averted.
  • At other times like this hopes of a dovish Fed would lift spirits more.

…but Sentiment Toward Stocks a Bigger Issue

  • Slew of bad news on big companies like JNJ, GS.
  • Healthcare hit by Obamacare risk.
  • Margin pressures (wages, tariffs etc.) may threaten earnings: COST, DG, TGT, AMZN.
  • China worries, growth stalling.
  • Rotating selling (REITs today) suggests broader liquidations under way.

Educational Idea of the Week: Credit

  • Leveraged stocks can really struggle at times of economic concern, like now.
  • “Cement shoes”
  • Transocean (RIG): 14K Jan20 5 puts →  50K Jan20 3 puts
  • Attend MasterClass for full lesson.

Workspace of the Week: Active Underlier Scanner

  • Look for stocks near key moving averages, or with MACD signals.

Russell’s Watch List

  • Facebook (FB) at risk near 50DMA.
  • Advanced Micro Devices (AMD), Boeing (BA): potential bearish triangles
  • Visa (V), MasterCard (MA), Square (SQ): Growth stories more dubious.
  • UnitedHealth (UNH) distribution risk after false breakout.
  • Emerging market risk: EEM, EWZ, FXI
  • Yen (@JY) has breakout potential.
  • Watch Aussie dollar (@AD) copper (@HG) for potential breakdowns.
  • Careful of gold miners, other safety plays because of rotating liquidations.
  • Bear markets “don’t make sense.”

Don’s Earnings Watch List:

  • Tonight: Oracle (ORCL) reports
  • Tuesday night: Micron Technology (MU), FedEx (FDX)
  • Wednesday morning: General Mills (GIS)
  • Thursday night: Nike (NKE)

Market Action returns January 7!

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David Russell is VP of Market Intelligence at TradeStation Group. 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.