The market got off to a good start this morning after China fooled everyone and kept its interest rates unchanged (for now) which has helped the bulls extend last week’s breakout. We felt there was a slight chance this could happen but we are more interested in the much-debated tax agreement here at home. The Democrats are pushing the Republicans to raise the proposed tax rate on estates but we don’t think it’s going to be a deal breaker. We would like to see a new deal this week, and we expect a new agreement by yearend, either way, which will be bullish for the market.
Although there were no major economic reports today, Tuesday is full of updates with the November producer price index (PPI), November retail sales, and October business inventories on tap. Also, the Federal Open Market Committee (FOMC) will be making a decision on U.S. monetary policy, with many analysts expecting the central bank to hold steady on interest rates.
As far as the rest of the week, on Wednesday the market will get a look at the November consumer price index (CPI), November industrial production, the December Empire State manufacturing index and the National Association of Home Builders’ housing market scoreboard.
On Thursday, Wall Street gets a briefing on weekly jobless claims, November housing starts, and the Philly Fed’s December manufacturing index while Friday ends the week with a peak at the Conference Board’s leading indicators for November.
Gold is getting a lift on the China news, as well as other metals, and is up $14 to $1,399 an ounce. Gold is facing short-term resistance at the $1,400 level and had traded to a low of $1,380 before rebounding.
The Spiders Gold Shares (GLD, $136.47, up $1.06) are up 1% and is an exchange-traded fund (ETF) we like to track when following the yellow metal. The 52-week high is $139.54 but we are still shying away from the sector. It’s not that we don’t like Gold, it just feels like a bubble that could get blown bigger before popping.
The U.S. dollar is down about 1% and was slipping $0.80 to $79.43 while the euro is up 1% to $1.33 vs. the dollar.
There are a few stocks worth mentioning this afternoon.
Shares of Adobe Systems (ADBE, $28.19, down $0.52) have fallen below their 50-day moving average, which was at $28.40. We did a bullish write-up on the Adobe last night in our Weekly Wrap but the charts have been telling us that a break below support could happen. This is normally a bearish event which could get worse as the next level of support comes in at $27.50. However, we know these levels can get stretched but it bears watching.
We mentioned last night that the company reports earnings next week and Adobe could be setting up for a nice strangle option trade. A negative earnings report could push shares below $26 while a positive, earnings beat and raised forecast could push the stock past $30. We are watching both call and put options for Adobe but remain on the sidelines.
Elsewhere, JDS Uniphase (JDSU, $14.31, up $0.88) got an upgrade this morning and shares are higher by 5% after the Piper (Jaffary) raised its rating on the stock from “Neutral” to “Overweight”. The brokerage firm was a little late to the party as shares have jumped 12% since November 8, which is where we spotted an opportunity.
We slapped a $15 price target on the stock at the time and told our subscriber’s shares were a bargain. Even better, the call options we recommended have now hit a triple-digit return.
As we head to press, the Dow is up 43 points to 11,453 while the S&P is advancing 5 to 1,245. The Nasdaq is higher by 2 points to 2,639.
We will be back in the morning with another full update but current subscribers can check the Members Area for the latest thoughts on our current trades.]]>