While I don’t think it has much effect on the market except for possibly some pyschological issues, Vice President Joe Biden said that he expects legislation on the healthcare bill to come through by Thanksgiving. Further, President Barack Obama remained adamant and stern about his thoughts on healthcare even while being attacked last night in a press conference. The two appear to not be wavering at all on the bill, and it appears on its way, whether you find that good or bad is up to you.
The markets, however, will be reacting to two key economic data points that will be released this morning at 8:30 AM. Those reports include the weekly initial jobless claims report that is expected to drop 15,000 to 555,000 from last week. The US government will also be releasing important information about the August trade balance of the USA. The balance has continued to drop and become more neutral due to less exports by American citizens. The balance is expected to drop again today. These two data points are extremely important, and with the current futures we are seeing, they should help give the market direction.
At this point, the futures are basically completely neutral. The Dow was down 1 point as of 7:45 AM, while the Nasdaq was up 2 points. Nothing too compelling at this point, but the neutrality is basically a result of another pretty uneventful morning.
There are no major earnings to announce this morning, with only two American companies even reporting earnings. Asia did have a strong day, as they were propelled by optimism about the American economy reported by the Federal Reserve’s
Beige Book report, as well as, a bounce back from yesterday’s sell off. Europe, on the other hand, started out mostly positive, but a number of the markets have turned south, losing momentum. Pretty mixed here, but the Shanghai Composite was the only Asian market to drop, which is significant as it appears time and again to strongly influence American markets.
Oil prices continue to rise, jumping at ridiculously fast rates, which is worrisome. The oil market has risen almost $4.00 in just two days. Today, the market will get some definite direction when the crude oil inventories report is released at 11 AM. On the other hand, the market should start on a positive note as the IEA made a report that the oil market will drop 2.2% from one year ago, better than the 2.7% expected. This helped drive prices in Asian oil up overnight. If the inventories, however, come in worse than expected, there is going to be a strong turnaround. The market jumped up way too fast, and it has created a short term bubble.
Other important news from major companies include Chevron struck a $60 billion deal with South Korea and Japan to 
supply them with natural gas, which was great news for the oil and natural gas producer. On the other hand, Monsanto Co. announced that they will be forced to reduce to cut their workforce by 8% to help lower costs. It has been awhile since we have seen a major cut like this, and it helps to showcase what should be a rocky road to recovery. Finally, GM appears will recommend selling its European Opel unit to the Canadian company Magna International.
Lets make some money!
Buy Pick of the Day: Corning Inc. (GLW)
The initial jobless claims came in better than expected with a drop to 550,000. This is a bullish indicator for today’s session because in the short term, it appears the unemployment rate will decline. On the other hand, the trade balance came in much worse than expected, mvoing back up to a $32 billion trade deficit for America, compared to the $28 billion deficit expected. I have not seen the updated futures just as yet, but my guess is for the open, the trade balance will be more significant. If that is true, then we are headed for a lower open.
The interesting thing about the trade balance is that if the deficit rose, it probably did so because of a rise in imports. That means that Americans are starting to spend more money on foreign goods, which is actually a healthy sign of a stabilizing economy. It will not be interpreted like that, but that is most likely what is actually going on with this figure.
The question, thus, is whether we will continue to move downwards after a lower open or will the market rally from a lowered open.
I think a good place to go with the money today is Corning Inc. America’s largest glassmaker announced that they are increasing their outlook on its Q3 sales volume, meaning higher revenues and that the company is seeing better business in the third quarter than previously expected. This is a fundamentally bullish report. The market’s reaction, thus far, is only a
four cent increase. This is definitely a value investment, though.
The market is definitely subdued this morning, but my hopes is that the pullback we are seeing in futures is a temporary lull from the trade balance news. The news is actually not terrible, and the unemployment claims was extremely positive. I don’t expect this to be a huge day in either direction, which is why we want to go with a company that could make some noise. Corning isn’t a necessarily volatile stock, but when you claim that your sales volume will be down less than 5% and previously forecast it would be down as much as 10%, that is market making news.
Additionally, Corning is in a great position to continue a three day market following rally the company has been on after bottoming out this past Friday. The stock, however, is still well below its upper bollinger band and just now showing some neutral technicals. It is neither oversold nor overbought, and its RSI is very neutral. This means that the news should have a very positive impact on continuing to push buyers into the stock.
Check my morning levels for the buy points and increases for which we are looking.
Sell Pick of the Day: Syngenta AG ADS (SYT)
Syngenta is one of the world’s largest seed makers based in Switzerland. The company is one of Monsanto’s largest competitors, and it should be extremely hindered in the American market by the news that Monsanto will drop its workforce a severe 8% on top of previous cuts. Monsanto is down over 8% in pre-
market trading, while SYT has only dropped 1%. While the companies are definitely apples and oranges in comparison to one another, if your top competitor is seeing an extremely weak agribusiness demand market and problems, you have to expect your competitors should be seeing a similar market.
Syngenta, further, is looking extremely toppy at the $48 price range. On a three month chart, the stock is touching its upper bollinger band, it is overvalued on RSI, it is overbought, and above its moving average. Every technical aspect of this stock says overvalued. The news, therefore, should really drop the stock, but it is down only 1% in pre-market trading. The stock, being foreign, has low volume, but that should not prevent a strong amount of short interest propping up in the market today.
I definitely can see this stock seeing some significant downward pressure and some serious profit taking on this company’s highs.
Happy Investing,
David Ristau
