The Sellers Attempt to Regain Control

The markets were challenged early as the sellers took their shot at pushing stocks lower. We started with better than expected jobless claim hitting a five week low at 330,000. However, overnight the Fed minutes came back to haunt as their is now speculation the Fed will cut faster than originally expected. I love it when the analyst swing from tree to tree pounding their chest yelling warnings on things they have no clue of how they will play out. The worries subsided as the day progressed on hopes the jobs report would be better than expected on Friday. Earnings are back on the top of the worry list as Alcoa missed expectations after-hours and was trading down 4.1%. Sears was down 13% on warnings about same store sales. The fun is about to begin and we all need to be prepared for some disappointment, and know the price of stocks will be adjusted for missed earnings.

Actionable items of interest today…

Semiconductors struggled on the day dropping 0.7% to follow up on yesterday’s gains of 1.5%. The mixed picture came from the outlook for demand in various sectors. Veeco was up 4.8% versus Nvidia down 3.7% to put the sector in perspective. The leadership is key to the technology sector maintaining an upward trajectory. A close back near the 10 DMA on the day keeps the momentum in play, but we have to watch to see how it settles out moving forward. I still like the upside in semi’s for now.

China (FXI) bounced off the test of the November lows gaining 1.1% on Wednesday, but the sellers were back today dropping 1.8%. The questions relative to the outlook for the economy and financial/banking system are winning over the positive comments from some analyst. The answer to last nights question, ‘is it time for a bounce?’ I am going with no for now and the break of support puts $34.75 in play short term.

Telecom was one sector not helping the chip stocks as it fell 1.6% on the day. The support is not in play short term with the 50 DMA our next level to hold above.  NII Holdings was off 11.5% to lead the sector lower, but the selling pressure in Sprint, 8X8, Verizon and AT&T did it’s share of damage as well. Tomorrow will give more insight if the downside continues. We have adjusted our stops to account for further downside should it continue.

Healthcare gained 2.6%  over the last three days of trading. The biotech sector has been even better with both the small cap stocks (IBB) and the large cap stocks (XBI) setting the pace. Watch for the sector to continue the trend.  Medical devices (IHI), healthcare providers (IHF) and pharma (XPH) are leading the way higher.

Energy is struggling and sold below the 50 DMA early, but managed to rally to close on the average. The downside in crude has been the challenge with it hitting $91.16 intraday, but managing to close at $92.30 or down a couple of pennies. The climax selling today may have established the bottom at least for now. The global economy is not looking great relative growth and that has slowed the upside for now. I like the sector long term, but the short term will have to work through the current issues and it could take some time based on the current reports. UNG was sitting on support at $20.50 and as stated the break would result in a test to the 200 DMA. That is exactly what transpired today down 3.9%. UGA is testing support at the $56.80 level with gasoline dropping on lower crude prices. Despite the colder weather heating oil (UHN) broke support today at $32. Downside pressure is building on the sector short term. Adjust your positions accordingly.

Airline stocks jumped higher today on better than expected ticket sales in December. American Airlines release information today and that sparked a rally across the sector. AAL was up 6.5% for the day breaking to a new high. Delta was up 4.2% also hitting a new high. This is one area to watch near term as the stocks continue their uptrend.

Alcoa missed earnings and sent the stock lower after hours and that will put additional pressure on the base metals (DBB) which were off 1.6% on the day. Copper has been dropping as well as steel. This could accelerate on the earnings report and it is a sector that shows some opportunity on the downside going forward.

Bottom line… the market held on to the uptrend, but the sellers are still in the wings watching. The outcome of the jobs report to end the week and the start of earnings next week will be the near term catalyst for the broad markets indexes. We have to exercise some patience currently and let this play out relative to the trend and momentum. The worries in reference to the economy remain a concern and if that grows the downside will become an issue relative to the short term direction. Keep your stops in place and protect the downside risk of your trades.