On the minds of traders and investors today was a mixed bag of earnings from companies like 3M (MMM) -- they actually had very strong quaterly results, but provided a very dim outlook. Among the tech names, Motorola (MOT) made some nice gains today after reporting an operating profit of $3mil. They had a loss of $183 a year ago. The kicker? You guessed it -- Google's Android smartphone sales. Mindshare continues to be occupied by the upcoming policy-setting meeting next week by the Fed, quantitative easing, and, the mid-term elections. To me, it looks like the investing public is holding steady, for the time being.
In economic news today, many were surprised at the drop in claims for state unemployment benefits. The Labor Dept. reported a drop of 21,000 to 434,000, the lowest level since July. Tomorrow (Friday), brings GDP and consumer sentiment.
In my opinion, the economic reports will not do much one way or the other to sway the action on Wall Street. Until we get through some of the events next week, I think we'll see sluggish action and possibly continued pullback in the markets (a mild pullback at best). I'm actually thinking of picking up some shares of the SPY if it pulls back to the $116 range.
Today's stock pick of the day is: the Direxion Daily Financial Bear 3X Shares (FAZ) – This is a leveraged ETF that seeks daily investment results, before fees and expenses, of 300% of the inverse of price performance of the Russell 1000 Financial Services index. The FAZ creates short positions by investing at least 80% of net assets in financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. With all of the fallout from the foreclosure crisis, it seems to me that a bearish position is more likely to produce gains. This kind of ETF is risky, but if you're bearish on financials, it's worth considering as a trade (not investment).
Until the foreclosure debacle came to light, financials were gaining ground and looking healthy again. The FAZ had been in a steady decline since August, dropping below it's 50-day and 200-day moving averages. It closed today at $12.56 and has seen some accumulation days through much of October. The stochastics and the MACD signal there could still be some room to grow. My first target is $13.50 and if it can close for several days above that, I think it will move up to $14.85-low $15 range.
As always, stay cautious and happy trading!
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Trading securities involves high risk and the loss of any funds invested. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. The suggestions contained in this blog are for informational purposes only and the author is not liable for any losses incurred as a result of actual investment activity on the part of the reader. This blog is presented for information purposes only and past results do not guarantee future performance.
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