Over the past week, sentiment has gone from invincibly bullish to cautiously neutral. Once again, the markets have begun worrying about the EU situation, as we have come to expect. After tentative action starting Tuesday, the markets rebounded on Friday after fluff headlines that an EU agreement is in place. Unfortunately, the agreement still does nothing to truly remedy the situation, but you wouldn't know that from Friday's strong action.
I expect more of this information will be digested throughout the week with pundits arguing both sides of the case. This could create additional concerns clouding the path for the bulls. The Fed meeting is on Tuesday and the majority don't expect any significant changes. Due to that, it will create significant waves if something shocking does come from the Fed. Some traders have been quietly talking about rumors of QE3 being initiated. Rick Santelli may have been the source of these rumors as he's said at least twice in the past few weeks that he believes QE3 is going to happen and it “could” happen as soon as this meeting. This is not to say he believes QE3 is beneficial nor does he actually want it to happen. I'd always defer to Santelli on this, but I'd be very shocked to see QE3 announced this week. The recent economic data during this past earnings season has given the bulls enough reason to think a local (U.S.) market collapse is not going to happen anytime soon. I'd be more inclined to believe that the Fed will see how long this optimism can last before resorting to another QE blast unless they feel we are at high risk of deflation which would bring the markets down.
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Opposite from last week, this week is filled with economic data. Due to recent economic optimism, the bulls are looking for at least stable numbers this week with possibly more risk to the downside if some data comes in well-below estimates. Europe will still be the focus though and if the Fed shocks, it will likely be in favor of the bulls rather than a disappointment.
For the week, Tuesday should be double-circled. Not only do we have the Fed meeting on Tuesday that nobody expects anything significant from (which gives it higher risk for a shock), but Retail Sales comes out in the morning. A strong number could set the tone for the rest of the week, assuming Europe doesn't shock us with some new negative news.
Thursday is the next day to circle. With the usual Initial Claims, we have PPI, Industrial Production, and the Philly Fed all in the morning. Friday has CPI in the morning.
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Dec 12 | 14:00 | Treasury Budget | Nov | -$139.0B | -$139.5B | -$150.4B | ||
| Dec 13 | 08:30 | Retail Sales | Nov | 0.8% | 0.6% | 0.5% | ||
| Dec 13 | 08:30 | Retail Sales ex-auto | Nov | 0.6% | 0.5% | 0.6% | ||
| Dec 13 | 10:00 | Business Inventories | Oct | 0.9% | 0.9% | 0.0% | ||
| Dec 13 | 14:15 | FOMC Rate Decision | Dec | 0.25% | 0.25% | 0.25% | ||
| Dec 14 | 07:00 | MBA Mortgage Index | 12/10 | NA | NA | 12.8% | ||
| Dec 14 | 08:30 | Export Prices ex-ag. | Nov | NA | NA | -1.5% | ||
| Dec 14 | 08:30 | Import Prices ex-oil | Nov | NA | NA | -0.2% | ||
| Dec 14 | 10:30 | Crude Inventories | 12/10 | NA | NA | 1.336M | ||
| Dec 15 | 08:30 | Initial Claims | 12/10 | 390K | 390K | 381K | ||
| Dec 15 | 08:30 | Continuing Claims | 12/03 | 3650K | 3625K | 3583K | ||
| Dec 15 | 08:30 | PPI | Nov | 0.1% | 0.2% | -0.3% | ||
| Dec 15 | 08:30 | Core PPI | Nov | 0.0% | 0.1% | 0.0% | ||
| Dec 15 | 08:30 | Empire Manufacturing | Dec | 3.0 | 3.0 | 0.61 | ||
| Dec 15 | 08:30 | Current Account Balance | Q3 | -$111.0B | -$110.0B | -$118.0B | ||
| Dec 15 | 09:00 | Net Long-Term TIC Flows | Oct | NA | NA | $68.6B | ||
| Dec 15 | 09:15 | Industrial Production | Nov | -0.1% | 0.2% | 0.7% | ||
| Dec 15 | 09:15 | Capacity Utilization | Nov | 77.7% | 77.8% | 77.8% | ||
| Dec 15 | 10:00 | Philadelphia Fed | Dec | 4.0 | 4.3 | 3.60 | ||
| Dec 16 | 08:30 | CPI | Nov | 0.1% | 0.1% | -0.1% | ||
| Dec 16 | 08:30 | Core CPI | Nov | 0.1% | 0.1% | 0.1% |
GAME-PLAN
After a good start to last week, the sentiment quickly changed and the bears were able to gain traction on light volume. This triggered stop losses and kept me in mostly cash rather than betting on the outcome of the important meetings Thursday and Friday. The bulls came back in full force Friday, but I'll wait to see how they start the week before I rush to join.
I'm still very optimistic for the seasonal rally and I'm happy to finally have those EU meetings behind us. If we can get a break from the EU circus, the bulls should run.
With that being said, I have two potential strategies this week. My preferred strategy is if the bullish optimism sets in with very confident sentiment. This means I can make another bullish play like two weeks ago and bet aggressively on specific plays I like that can purchased near strong support. This would likely have to take place after Retail Sales and possibly after the Fed Report.
The other strategy, which I would say may be more likely, is to place small tracking positions out there. I'd deploy numerous small positions that I can use a looser stop loss in due to being smaller bets. This allows me to keep minimal risk, but still have some market exposure while I can get a feel for the action better. Through this strategy, I can watch the action a bit closer in my positions and when something turns ripe, I can be more aggressive at that point. This is my ideal strategy when uncertainty exists, but I feel odds of upside are still likely.
You can follow most of those trades that I publicize via StockTalks for free.
I posted my early radar on Friday and I narrowed it down a bit as I analyzed my shopping list. I continue to stick with positions showing strength rather than trying to call reversals in stocks that have been falling. As usual, I will try to post charts up by Monday night on potential trades I may be making.
** = Early Favorites
AKRX)">Akorn (AKRX) – Possible Breakout
Apricus Biosciences (APRI) – New Trading Range
ARIA)">ARIAD Pharma (ARIA) – Possible Breakout
Bebe Stores (BEBE) – New Trading Range / Possible Breakout
Build A Bear Workshop (BBW) – On Trendline – Needs Volume
Cambrex (CBM) – On A Breakout
Caribou Coffee (CBOU) – Large Triangle **
Cerus (CERS) – New Trading Range
Conn's (CONN) – New Trading Range / Possible Breakout
Convergys (CVG) – On Trendline – Needs Volume
Elan (ELN) – Strong Overall Chart – Increase Timeframe Of Trade
Entegris (ENTG) – Possible Breakout
Evolution Petroleum (EPM) – New 52-Week High / New Trading Range
Flow International (FLOW) – New Trading Range
Flotek Industries (FTK) – Small Triangle **
HALO)">Halozyme Therapeutics (HALO) – New 52-Week High / Breakout
InfoSpace (INSP) – On A Breakout
KOG)">Kodiak Oil (KOG) – Possible Breakout
Cheniere Energy (LNG) – Downtrend Towards Key Support **
Magic Software (MGIC) – Recovery / Needs Volume
Micromet (MITI) – New Trading Range / Possible Breakout
NR)">Newpark Resources (NR) – New Trading Range / Possible Breakout **
Omnicell (OMCL) – New Trading Range / Possible Breakout **
Oncothyreon (ONTY) – Possible Breakout
Orasure Technologies (OSUR) – Near Trendline
Orbitz Worldwide (OWW) – New Trading Range
Progenics Pharma (PGNX) – New Trading Range
PKT)">Procera Networks (PKT) – New Trading Range / On A Breakout
Revett Minerals (RVM) – New Trading Range
RTI Biologics (RTIX) – Possible Breakout
VICL)">Vical (VICL) – New Trading Range / Possible Breakout **
You can follow my trades alongside the 36,000 plus market players who follow me on SeekingAlpha (Shameless promotion). As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna has no positions in mentioned stocks
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Tags: Akorn (AKRX), Ariad Pharma (ARIA), Cerus (CERS), Cheniere Energy (LNG), Economic Calendar, FOMC, Game-plan, General Market Commentary, Halozyme Therapeutics (HALO), Kodiak Oil (KOG), Michael Kudrna, Newpark Resources (NR), Procera Networks (PKT), Rick Santelli, S&P 500 (SPX), Stock Radar, Vical (VICL), Weekly Homework
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