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Manic Monday

Good morning y’all. Well, not much has changed overnight as S&P futures continued to hover near the 1700 level. The buzz around a Janet Yellen appointment as Federal Reserve Chairman continues to grow, and some talking heads are speculating that we’ll get some direction from the White House in the next 72 hours as to who the next Chairman will be.

Interest rates will obviously be in focus quite a bit this week with discussions about not only the Fed Chairmanship, but also the September Fed meeting where the T-word will undoubtedly be uttered quite a bit. We’ve seen the 10-year knock on the door of 3% in the last two weeks before retreating in recent sessions to roughly 2.8%. Yields could take another hit today as the presumed hawkish candidate Larry Summers withdrew his name from the Chairmanship race yesterday, though we believe the market is overselling just how dovish Janet Yellen is (and, for that matter, just how hawkish Summers is).

On to the markets: There will be green. Just about everything that has traded at least one share this morning is in the green, and our longs are no exception. We peeled off our $DDD long last Friday for a nice one-day gain, but that 3-D printer is poised to move higher this morning. Our current longs $GOOG, $NFLX, and $FCEL all appear poised for a higher open.  $NFLX has held up particularly well all year, and could be poised to break out this week above this year’s (and last week’s) high of roughly $315. The stock had a nice reversal off of the 8-day EMA on Thursday that could’ve provided entries and bounced again off of that level on Friday and sustained its gains.

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Google looks strong this morning as well with the stock tagging $897. While the chart isn’t as strong as $NFLX, the stock provided another potential entry on Friday as it reversed off of the 8-day EMA as well. Look for a move over $898-$900 to send the stock to the $909-$913 level. If the stock can get through there, look for it to make a run at all-time highs once again.

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Keep an eye on $TSLA, as the stock held up above its 20-day moving average despite being under some pressure last week from the shorts. The stock is moving higher this morning (duh) and could take another run at all-time highs if it gets continuation. The bulls have been calling the last few days a consolidation, while the bears are saying the stock is out of gas. Let the market decide for you, then act. Don’t let your opinion get in the way of momentum.

 

Watch out for the broader market to hold or begin to cede its gains in early trading. If stocks hold up, we could see a continuation move higher throughout the session and into tomorrow. However, with all of the economic news on deck this week, it may be prudent to take some profits to avoid any negative reaction coming out of the Fed meeting or rumblings of an appointment of a new Fed Chairman. Still, Monday appears to be a profitable day for those of you who leaned long today.

Happy trading!

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Summer(s) Equinox

Happy Sunday y’all. Hopefully everyone’s rooting interest in the NFL is coming up aces today, and a special shout out to all the Chicago Bears fans out there today. Jay Cutler continues to be the most mercurial quarterback in the NFL, but Martellus Bennett managed to bail him out with two more touchdowns to lead the Bears to a 31-30 victory over the hapless Christian Ponder and the largely ineffective Adrian Peterson. In all honesty, the Bears should’ve won that game by double digits, but Bad Jay and poor special teams on the opening kickoff essentially spotted Minnesota 21 points. I digress…

It seems we can’t go one weekend this month without some sort of major economic or geopolitical news item that will impact the market. This was already shaping up to be a monumental week with the Fed meeting and the potential of a reduction in monthly asset purchases, but Larry Summers decided to throw us a curveball and withdrew from the race for the Fed Chairman appointment once Ben Bernanke takes his leave. Many have speculated that Summers’ confirmation would be an arduous process as many see him as an abrasive individual, with his detractors citing his tarnished tenure as president of Harvard University – specifically, his treatment of women. Janet Yellen, believed to be a far more dovish candidate than Summers, becomes the de facto leader in the clubhouse. Donald Kohn, a former Fed vice chairman, and former Secretary of the Treasury Timothy Geithner remain popular candidates among others.

The impact of Summers decision was fairly easy to predict before futures even opened. Given his aversion to continued quantitative easing and a more hawkish stance overall, stocks would be poised to rise should Summers not receive the nomination. However, given the fact that Summers is pulling out this early, S&P futures surged on the open this evening to the all-time highs, and the bulls appear to be in full control once again. While it is  not a foregone conclusion that Yellen will be appointed (and some close to the Obama camp have stated the President would prefer to go elsewhere now that Summers, an Obama favorite, has withdrawn), we would expect even interest rate sensitive stocks to rise tomorrow as well, which does not bode well for our $HD and $T positions. Still, we should note that there is plenty of time for our theses on those names to play out. On the plus side, our long positions in $NFLX, $FCEL and $GOOG should get a nice lift. Obviously, we wish we were leaning a little longer, but we should see some nice gains Monday regardless.

Tomorrow should provide some opportunities for intraday trades at the bell. With so many events that could shake markets this week, it may be prudent to take some profits on long positions at tomorrow’s open should we sustain this rally overnight (and there is little reason to believe that we won’t). Still, it is easier to have conviction to the long side as the market has pulled off something of a stealth rally in the past week or two. We’ll be back in the morning to assess what is moving, but until then, enjoy the rest of your NFL Sundays!