Techs save the day
E-mini NASDAQ – Stocks rebounded mid-session, as investors flocked to the tech sector as a safe haven of perceived strong earnings going forward, especially with the Christmas shopping season nigh. After the close, tech heavyweights Apple and Texas Instruments both posted earnings that topped street estimates, with Apple blowing away estimates of $0.86 a share with a $1.01 post. Banking shares managed to rebound somewhat on news that Bear Stearns has forged a strategic alliance with a Chinese bank to get a stronger foothold in the lucrative Chinese investment banking sector. The FDIC warned that the subprime squeeze will get worse before it gets better, with the number of resetting ARM mortgages expected to peak in the second quarter of next year. There are now rumblings that the credit card and auto loan industries will be the next to feel the pinch, as home mortgages are generally a priority over other debt for consumers. Unlike the broader market, the NASDAQ mainly looks technically sound, not backing down from recent highs and trading above the major moving averages this morning. Momentum remains strong at a healthy +92.00 and the RSI is neutral at 44 percent. Support comes in at 2125.00 and 2075.00, while resistance can be found at 2175.00 and 2200.00
Crude Oil – Crude Oil dropped for the second consecutive session as traders took profits. Turkey has reiterated plans to invade the Iraqi Kurdish region, with the Turkish prime minister recently commenting that no foreign power (read: the U.S.) will dictate what the nation does in its own security interests. What remains to be seen is the scope of the conflict. In addition to Turkey and Iraq, heavily Kurdish regions exist in Iran, Syria, and Armenia, which could also be drawn into a conflict. On the fundamental front, Crude Oil inventory data has been bearish recently, and many traders are looking for another build in Wednesday EIA report. A slowing economy could weaken demand, and traders still have Chinese industrial production on tap later this week. December Crude Oil is showing overbought readings on both the RSI and slow stochastic indicators, which suggests that the market will either labor going higher or may break down a bit. Momentum is very strong at a robust +5.76 coming into trading and the indicator is showing very slight bullish divergence from RSI. Support can be found at 84.75 and 82.45, while contract highs at 88.49 may act as resistance.
Bonds – The treasury markets took a pause yesterday to cool off after December Bonds gained almost three points over the prior three trading sessions. There was some profit-taking yesterday, and many traders were reluctant to add to their positions ahead of the FOMC meeting next week. Bond traders may also be reluctant after several failed rallies over the past year. The FDIC warning over subprime debt helped he market avert a broader sell-off, but Bonds have not felt their classic “flight to quality” effect recently due to the weaker Dollar. Bond technicals could also be blamed for the pause yesterday, as the market is extremely overbought on the RSI and slow stochastics, with the stochastics close to crossing over to the downside. Yesterday's indecision led to a spinning top pattern, which suggests some negative short-term bias. Support comes in at 112-10 and 111-13, while resistance can be found at 113-16 and 114-08.
Commodity Analyst, Rob Kurzatkowski
