Commodity Correction Intensifies, Weighs on Market

T3 Live

S&P futures are down 7-8 handles this morning as the commodity correction intensifies. Many macro commodity levels were breached on Friday with volume to the downside. This morning they are seeing follow through to that move, and it is weighing on world markets, most of which are down around 1%.

Gold (GLD) is into the target zone in two days, and was as low as $135 this morning. That was the lower-end of the level mapped out spot in the chart/article above. If I was short, which I'm not, I would be covering some this morning. It might try to pause here, but the velocity of this move now opens the door potentially to $123-129 over time.

Silver (SLV) has major support at $22.50-$23, but if this spot doesn't hold there isn't really much support until $19.50ish.

Meanwhile, S&P are down this morning, and traders have their eyes on Friday's low, which was 1579, and the 8-day MA, which is 1576ish. I think it would be very impressive if we held the 1573-1576 area. Bigger support is 1562-1564 (21-day moving average). Most people are trying to figure out whether the intensity of the commodity move will move the broader market. We will know this if the areas above do not hold. I'd watch the banks to see if they can hold in well as well if some strength comes into the transports as lower Oil could help them. Retail has been strong, and there has been lots of great action in biotech and pharma stocks as well.

Banks: Wells Fargo (WFC) and JP Morgan (JPM) both had decent reports, gapped down but help up well during Friday's session. This week we will see Citigroup (NYSE:C), Goldman Sachs (GS), and Bank of America (BAC). Let's see if this group stays strong.

The banks were able to hold up relatively well after JP Morgan and Wells Fargo beat "consensus estimates" on Friday with their earnings reports, but seemed to fall short of whisper numbers. The Financial Sector ETF (XLF) closed the day down 0.48%, but contained the damage well after the gap down. JPM reported first quarter earnings per share of $1.59 on top line revenue of $25.848 billion and net income of $6.5 billion. Earnings beat analysts' consensus estimate for the quarter by $0.20. The stock closed the day down 0.61% as it has some resistance at $49.60 level. It's trying to reclaim some key moving averages. A move through $49.60 with volume could take us back to retest the prior highs.

Wells Fargo's first-quarter profit rises 22% on stronger credit, but mortgage-banking income drops. Earnings beat Street views. The bank's net interest margin narrows and mortgage originations fell. The stock retraced 0.80% on Friday after a gap down at the open but held the recent base at $36.60 level. It closed well off of lows and above its 8- and 21-day moving averages, showing commitment. The longer it holds $36.60 support level, the higher chances we could see a move back to highs.

C is going to headline Monday's big earnings. It is projected to report first-quarter earnings of $1.18 a share. The stock has seen a strong bounce since April 5 to get back above all key moving averages. It saw a controlled pull back into the weekend, but is holding above its 50-day.

GS (Tuesday) is expected to report first-quarter earnings of $3.87 per share - the highest estimated EPS among its peers. The stock has been acting better after getting a nice bounce on April 5. It has reclaimed its 8- and 21-day moving averages and has some resistance at its 50-day at $150.26.

BAC (Wednesday) is projected to report an EPS of $0.22. The stock has a steady intermediate uptrend in place since July 2012. It retraced a bit into the weekend but is wrapping around its 8- and 21-day moving average. Use Friday's low of $12.07 as the new point of reference. Below that we have bigger support at 50-day of $11.98 and the prior lows of $11.64.

American International Group (AIG) (May 2) doesn't report until May 2, but it has a tight flag pattern that is worth to keep on the radar. It got an aggressive two-day move starting on April 5, and is flagging nicely above its key moving average, showing the bullish sentiment remains intact.

Some Retail names remain strong: Wal-Mart (WMT), Home Depot (HD), Target (TGT), TJX Companies (TJX) and Costco (COST).

Tech remains mixed.

LinkedIn (LNKD) made new move highs on Friday and still is best in breed.

Google (GOOG) is trying to turn the corner after correcting since March 6. It's building a descending channel to watch. I might look to grab a few if it can get and close above $793, but earnings on Thursday will be key.

Amazon (AMZN) is now up five days in a row and triggered through another spot at $267ish. The streaky stock has been basing since last earnings. Earnings will be interesting.

eBay (EBAY) has been a nice trade. Now it needs to do some work above $56ish.

Yahoo! (YHOO) made another 2013 high, and earnings are out this week.

Facebook (FB) woke up a bit but needs to hold above $26.80ish to stay constructive.

Apple (AAPL) has not provided much opportunity lately as $419 is key support. Micro resistance is $437. There is not much to do until we get closer to earnings unless either of these levels get taken out.

Sprint (NYSE:S) is the subject of a $7 takeover bid. Congrats if you still own it. It was a nice trade above $5.96 and it held above that breakout for weeks. I unfortunately out of boredom sold it Friday as I cleaned up some positions. Oh well.

Microsoft (MSFT) started to act better until GS threw cold water on it. There is not much to do now until it potentially tries to get into the gap at $29.20.

3-D Systems (DDD) is starting to act better. There was a nice buyable pivot at $30.30. If it can get above $35.65 and perhaps it could continue higher.

Stratasys (SSYS) also has been a nice tactical play since its correction. Above $78.80 it could continue.

ExOne (XONE) made new highs on Friday and seems to have a bright future.

Casinos also have been acting well: Wynn (WYNN), Las Vegas Sands (LVS) and MGM Resorts (MGM) are worth a look.

The next few sessions will be interesting as during the next two weeks we see the meat and potatoes of earnings season. It will be interesting to see if markets take the commodity slide in stride.

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*DISCLOSURES: Scott J. Redler is long BAC JPM DNKN FB DDD ZNGA LVS. Short SPY.

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