Three Days of Testing… What’s Next?

I could not have timed my webinar tomorrow, “Managing the In-Between – Risk Management” (part 4 of the “Back to Basics” series) any better. The major indexes have just experienced their third day of consolidation or test off the boost from the Fed last Wednesday. The speculation is spread throughout the headlines and investors are anxious about the outlook for stocks. Believe me you are not alone on that front. One of the greatest challenges we face is calming or dealing with our emotions between the point of purchase and the exit point on positions. We will spend an hour reviewing how to do just that tomorrow. If you have not registered now is a good time to do so as space is limited. After all… there is no charge for the live presentation. Click on the link above to go to the registration page.

The downside was in play again today, but it was not very aggressive and the test of support found buyers willing to sit and hold those levels. That calmed the volatility and not much transpired from mid-morning to the close. I am not expecting much in terms of changes as we conclude the third quarter of trading. The economic data has been solid, but no significant changes. If the Fed comments last week were any indication the data is more than accurate in the forecasts about growth. Thus, don’t be surprised if this is a boring week of movement for the broad markets as we hope for the best, but prepare for the worst.

Stock of the Day: Apple… Again!
Last week they were making me seasick with the ride up and down as investors tried to determine the outlook on the iPhone launch. Today answered questions at least for now… buyers were ready for a new phone. There were plenty of 4S upgrades turned in for the new 5S, so many in fact, they sold out of phones. The stock opened at $496 and closed at $490.64 up 5.01% on the day. The media is happy, but the analyst and shareholders are still holding their collective breaths on this move. In talking with traders during the last week on this topic it was a very negative vote overall. The Apple lovers were optimistic, but the rest were very negative about the overall Apple experience for the end users. The software upgrade has been an equally important change to stir optimism. This is still just a trading opportunity on either side of this stock. I am still not willing to roll the dice here and will watch to see how the next week or two plays out.

What about the radio debut on iTunes? Apple announced they had 11 million unique listeners for their new iTunes Radio service. The news hit Pandora more than helped Apple as Pandora fell $2.79 or 10.2% on the news. My question would be do I buy Pandora on the move or believe Apple will be a big player in this space? Pandora reports 72.1 million listeners and approximately 50% access Pandora through iOS-based software (Apple operating system). Not to mention Pandora will be available in approximately one-third of automobiles in 2014 models. Something to watch as it unfolds.

Move of Interest: Semiconductors (SMH)
The semi’s had been the leader for the technology sector overall and the test today of the 491 level along with the 10 DMA are important. If we hold and rise higher tomorrow that would be a positive for the sector as well as the leadership of the broader market. Cirrus Logic (CRUS) and Interdigital Communications (IDCC) were two of the leaders on the day, but also have added leadership over the last month of trading. This was one of the early leaders on the bounce off the August 27th low. Looking for this to give some insight relative to the outlook going forward.

Economic Data: 
The Chicago Fed national index for growth moved up for August and still points positive near term. Tomorrow we have the Case-Shiller home price index, FHFA home price index and consumer confidence. All three will be watched closely as the housing market showed some slowing n August and potentially in September. With the Fed out talking again about the economy vs the stimulus cuts the data will take on renewed impact for markets. Throw in the constant babble in Washington on the budget and you get the insight as to why the markets are drifting lower the last three days. Watch, protect and take what the market gives short term.

Don’t Out Smart Yourself on This One: Gold
My comments from last week remain! The bright yellow metal that caught everyone’s attention and jumped to $1365 on the Fed announcement, is now at $1323. Inflation/speculation was the driver and that has tapered since. I don’t see the upside near term and I am more than willing to wait this out. Inflation is not a factor currently, demand is not rising and it is just the maniacal pump and dump analyst/speculators that are riding this news. Trade at your own risk. There is not lifeguard on duty!

Trend Change? Mid-Cap Index (IJH)
Our weekend update addressed our concerns with the sector and the test of support at $124.50 short term. That gave way to a test of the $123.50 mark and the 10 DMA today. This is the weakest link currently and worth watching on the downside. If it continues lower watch how the small cap (IWM) index responds.

Another sector worthy of attention is the Internet index (FDN). Some big red numbers in the sector today led by Groupon and Netflix on the downside. This has been a leader off the August 27th low and a reversal would be a negative overall.

As always there is plenty to watch and trends to follow. Keep you eyes open, your ears tuned and your stops in place.