When we wrapped our our homework last night, futures were showing a nasty open after China announced new property-buying restrictions that include higher mortgage rates and down payments. The move was aimed at cooling mortgages on second homes that have seen property prices swell in some cities. China also slapped on a 20% capital gains tax on sales of existing homes. China’s Shanghai exchange took its biggest hit in 2 years as stocks were down 3.7% in overnight trading.
Two stocks we like to trade on China news include Baidu (BIDU, $90.06) and Caterpillar (CAT, $89.62, down $1.74) and both are currently on our Watch List as possible new option trades. We would like to see shares in both companies hold support and rebound to test resistance as we missed some juicy put option gains today. We don’t want to chase but there could be further breakdowns in both these stocks.
Dow futures were down over 70 points at one point last night but steadily improved ahead of Wall Street’s open. The rebound in futures has lead to some choppy trading but we mentioned this morning the beginning of March is historically bullish and that the market could set new highs on continued momentum.
There are clues we are watching for as confirmation a pullback is coming but today’s strength bodes well for the bulls. There doesn’t seem to be a negative impact from the sequester cuts that began to take effect on Friday as the zombies failed again to come with an agreement to reduce America’s nearly $17 trillion in debt.
Another stock we want to mention today is Strarasys (SSYS, $68.30, up $4.04) as shares are getting a nice pop after earnings topped expectations. We have covered the 3-D printing stocks in our Weekly Wrap and although we haven’t played any names in the sector, we do continue to monitor them. We profiled 3D Systems (DDD, $35.71, down $0.99) and we should of added it to our portfolio when shares were in the teens. At current levels, these stock are slightly rich and we would wait for a pullback instead of chasing these names.
As far as the market, the Dow is down 53 points to 14,036 while the S&P 500 is lower by 4 points to 1,513. The Nasdaq is off 12 points to 3,158. As usual, we have a lot to cover in our first day back so let’s get on it, Jack! Subcribers, check the Members Area for the updates and we could have a NEW TRADE (or two) coming for our Weekly Wrap so stay close to your email inbox this afternoon.