S&P 500 Overview: Signs of Fatigue as Catalysts Dwindle
- Momentum slowing. Last week had narrowest point range since late September.
- Highs before open w/failed rallies near 2720. Then resistance moved down to 2712 pre-market pivot. (Support → resistance?)
- Lots of uncertainty about China, shutdown. But “good news” of positive resolutions seem to be mostly priced in.
- Lack of leadership, with safe-haven REITs and utilities closest to 52-week highs.
- Potential resistance at late-June low and 100-day MA.
- Still, considerable upside potential catalysts remain apart from headline risks.
Economic News Less Positive / More Dovish:
- Jobless claims higher than expected for 2 straight weeks.
- Rail traffic weakest since early 2017.
- Australia, India central banks turned dovish last week.
- Fed dropped rate hike mention on 1/30.
- Yellen on 2/6: Fed’s next move may be to cut.
- Several weak readings from Europe last week.
- Despite these readings, “binary” political events are to blame: like Brexit, US-China trade war, potential government shutdown.
- That creates upside potential on signs of resolution, even if data stays weak.
- Semiconductors seem to be main trading vehicle, either way.
Don’s Watch List: Barron’s Sustainability
- Best Buy (BBY)
- Cisco Systems (CSCO)
- Agilent Technologies (A)
- HP (HPQ)
- Texas Instruments (TXN)
Russell’s Watch List:
Wary of retail/consumer names post-holidays:
- Target (TGT) stalling under $72.
- Amazon.com (AMZN) under 50-day MA.
- Video games extremely volatile. Layoffs and news of free products is hardly bullish.
Turnarounds Emerge:
- Starbucks (SBUX) sneaks to new highs amid loyalty program, China traction.
- Hanesbrands (HBI): Champion’s offsets innerwear weakness.
- Coty (COTY): Messy consolidation shows signs of improvement amid heavy short interest.
- Mattel (MAT): Barbie showing signs of regaining traction.
Potential Winners from China’s Huawei troubles:
- Nokia (NOK)
- Ericsson (ERIC)
- Ciena (CIEN)
Big Techs Drifting Around Quarterly Results:
- Alphabet (GOOGL) spending is a worry again. Core search slowly weakening.
- Twitter (TWTR) sees cost pressures as users stagnate.
- Don’t forget Nvidia (NVDA) reports Thursday night. (Bernstein downgrade today.)
Softwares May Be Next Growth Area:
- Secular growth + dovish Fed often positive for high-multiple stocks.
- CRM, COUP, OKTA, TEAM, NTNX, BOX, SHOP, FTNT, VEEV
Options Trades in Focus:
- 2/4: American Airlines (AAL) collar with March 36 puts and March 37 calls. Hedging strategy at potential resistance line.
- 2/11: Colgate-Palmolive (CL): May 65 calls → August 67.50. Greeks adjusted as cleaning-company shifts to pet food.
