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9:00am (EST)
The market is pointing towards a lower open this morning to start the holiday-shortened week on concerns over the health of a few European banks. There isn’t much economic news or earnings releases scheduled to hit Wall Street this week so trading could be tricky. Although news will be light, Wednesday could be pivotal as the Fed will release its latest beige book report on regional economic activity.
The bulls will be trying to continue their momentum following a 3-day rally off last Tuesday’s lows while the bears look to hold key resistance levels. Across the pond, European markets are trading lower following a report said the country’s major banks have more potentially risky government debt on their books than was disclosed during the “stress tests” a couple of months ago..
In corporate news, Oracle (ORCL, $22.92, up $0.44) is up nearly 8%, to $24.67, in pre-market action after they announced it was hiring ex-CEO, Mark Hurd. The former CEO of Hewlett-Packard (HPQ, $40.34, up $0.66) resigned in August after a probe into sexual harassment allegations but could pump new life in Oracle.
As we head to press, Dow futures are down 50 points to 10,386 while the S&P 500 futures are lower by 6 points to 1,097. The Nasdaq 100 futures are off by 10 points to 1,857.
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Apple (AAPL) Loses Weight
Thursday, April 7th, 2011
8:45am (EST)
The bulls had us a little nervous yesterday as we were writing up the afternoon update. The pattern this week has been a strong start at the open, followed by a mild bear attack, before a slow steady climb back towards resistance by the bulls.
The talking heads and pros have been calling for another pullback, and we will get one, but the trend has been higher as we head towards first quarter earnings season.
The Dow made a run up to 12,450 on Wednesday before finishing with a gain of 33 points, or 0.3%, to 12,426. Our near-term target is 12,500-12,600 with support coming in at 12,200 then 12,000.
The S&P 500 advanced 3 points, or 0.2%, and close at 1,335 after racing to a high of 1,339 intraday. The close above 1,334 was big as we continue to look for a pop up to 1,350. Support is strong at 1,325.
The only thing we can beach about is the Nasdaq’s failure to close above 2,800. The index added 9 points, or 0.3%, to finish at 2,799.82 after reaching a high of 2,815. Our target remains 2,850 over the short-term with support at 2,750-2,700.
Some of the blame for Tech failing to clear the 2,800 level can be attributed to Apple’s (AAPL, $338.04, down $0.85) recent weakness. Shares were down for the sixth-straight session and have been under pressure since the Nasdaq announced a rebalancing of the Nasdaq-100 Index next month.
We have mentioned before that Apple makes up 20% of the index which means how Apple goes, so does the Nasdaq 100. The new allocation will shrink Apple’s weighting in the index down to 12% which is forcing some money managers to reduce their holdings.
From the look of things, Apple’s stock (blue line) could test $320-$325 which is the first wave of support. Shares recently broke below their 20-day and 50-day (green & red lines) moving averages (MA) and are on the cusp of falling through their 100-day MA as well (purple line). Further support is at $300. Apple trades WEEKLY options which are a lot “cheaper” than regular options so there may be a trade here in the next week or two.
We have seen somewhat of a ripple effect as a few of the larger stocks on the Nasdaq have become more volatile. Cisco Systems (CSCO, $18.07, up $0.85), Dell (DELL, $14.78, up $0.35), Intel (INTC, $19.95, up $0.24), Microsoft (MSFT, $26.15, up $0.37) and Oracle (ORCL, $33.58, down $0.34) will become more weighted within the index. These stocks have shown some strength on the news as fund managers scramble to add their names by May 2 which is when the rebalancing takes place.
As we head to press, futures are showing a higher open to start: Dow (+25), S&P 500 +3), Nasdaq 100 (+5).
We have a lot to cover in our Members Area so let’s get to it. Subscribers, check for the updates.
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