Going into today, most eyes will be on the jobless claims report and building permits report at 8:30 AM. The market is already looking to go green, but these indicators will need to be better than expected to continue the bull market run today. I will update on these when they are release.
8:40 AM Update: Jobless claims and building permits came in very bullish. Jobless claims came in down to 550,000 while estimates were expected to increase to 593,000. That is really great because the market had priced in the increase and expected job losses. That makes this even better. Canada’s building permits were better than expected to, which should indirectly help the market.
Overall, today’s market is looking pretty good to bounce back after yesterday’s breather (besides those key data points). The stock market took some pullbacks yesterday on weak jobs data and corporate earnings. We have reversed one of those trends already today. Comcast released solid earnings with a 54% rise in profits, year-over-year, and it beats analyst estimates by more than 25%, reporting an EPS of 0.33, while estimates were at 0.26 EPS. Also, Sirius XM Radio said its revenue more than doubled as it met analyst expectations on profits.
On the retail front, reports were mixed coming from two major companies, Costco and Aeropostale. Costco reported same-store sales down 7%, which was worse than the 6.7% expected from analysts. However, Aeropostale had record sales in July, increasing 6% from last year, and the company raised its Q2 guidance on the bullish news. This comes after retailers have already had a great run off of lows in 2008. On the earnings and company report front, things appear better than worse, which is helping to explain morning futures.
Futures are up pretty heavily in the morning trading session. As of 8:00 AM, the Dow is up 45 points, the Nasdaq is up 1 point, and the S&P is up 3.5 points. The S&P looking very good this morning. Things are definitely being helped by some great foreign news, as well. Asia had a great day on a "technical rebound" as investors bought bargains.
"It was a technical rebound as there were few incentives to buy shares today," commented Yutaka Miura, senior strategist at Mizuho Securities Co. Ltd, on Bloomberg.
Europe is doing well, as well, on corporate earnings and the European’s Central Bank’s decision to keep interest rates at the same levels to help continue to bring growth to the hard hit European financial sector. Stocks across the continent were up around 1% to 1.5%. These both are helping those futures and will boost stocks.
On to the picks…
Buy Pick of the Day: Solarfun Power Holdings Inc. (SOLF)
Welcome to my favorite stock. SOLF made me my first 100% gains in two days back in the summer of 2008, and I have loved it ever since. It is one of the most volatile stocks out there, and it is one where we want to put our money today. This morning, Canadian Solar Inc. released extremely bullish earnings, seeing a profit rise of over 50% from last year, while analysts were expecting the company to report an over 100% decrease in profits. The company killed expectations, and it is going to send the entire sector up. The reason I like SOLF over other solar stocks is because it has become a bit of the laggard, and it will definitely feel the most movement on this news. On the morning of First Solar’s earnings report, the stock moved 8%. Just two days ago, on GT Solar’s rather positive outlook for the solar industry, the stock jumped over 3% pre market. The stock has a lot of movement, which is something I love for day trading.
On the three month chart, SOLF looks overvalued and overbought, but I like the trend I am seeing on fast stochastics. The stock is seeing a really nice upward trending stochastic line, which means buyers are continuing to enter this stock. After a major pullback one week ago, the stock, therefore, has some upward momentum capabilities still possible underneath that upper bollinger band. In pre-market, the stock is up over 5%. Usually, I would be worried about this, but we will be able to buy on a dip and watch this stock run.
Entry – Check back on morning levels for entry and exit. I want to see how that data comes out before recommending anything here.
Short Sell Pick of the Day: SRS
You know that Grinch Stole Christmas song where they say "I wouldn’t touch you with a ten foot pole." Well, I wouldn’t touch SRS with a 100000000 foot pole. This ETF is just terrible. I don’t know when it will stop falling. Last night, we got a report from Deutsche Bank that said foreclosures will double by 2011, and Simon Property Group got downgraded. So, we would think good news for SRS. Hmm…pre-market, it is down 3%. What I think is happening here is just that investors are really buying up REITs and housing sector because these stocks are so far below prices they were at 2 to 3 years ago investors see great opportunity. While I will say that the housing market and REIT market is not out of the woods, SRS is not done falling.
Another hit today was the Federal Realty Trust, a large REIT, reported positive earnings and beat expectations. SRS is just something I do not want to be near in any way shape and form.
I am ignoring the technicals on the chart because it doesn’t matter. I am ignoring fundamentals. I am going with the overwhelmingly, unbelievably, fantastically ridiculousness of SRS over the past three weeks.
Entry – I think the ETF will open around the 11.70 – 11.80 range. You want to get in this for a short sale right away. It appears key economic data is very bullish. This could be a huge day.
Exit – Look for a 2-3% exit, putting exit around 11.50 – 11.40. If it opens lower, I still want to look for 2-3% exit on no matter how low this opens. This is ugly.
Good Investing and Good Luck,
David Ristau
