Looking For A Solid Move To Start April? Joke's On You! (RIO, FCX, NEM, SCCO, X, AKS, MT, DIA, SPY, SLB, OXY, HAL)
The market has been steadily climbing for the past two weeks, putting in small gains but seemingly remaining unsure of itself as divergences in different indices and sectors began to accumulate. Traders were looking to Friday's important economic data (Jobs Report, ISM Index, and Construction Spending) to provide the catalyst for a distinctive move in either direction.
At 8:30 a.m. EST, the jobs report came in better than expected and sent futures soaring up nearly ten points before the opening bell. If you were watching materials stocks, however, you might have noticed something strange; they were not rising along with the futures. Rio Tinto (NYSE: RIO), Freeport McMoRan (NYSE: FCX), Newmont Mining (NYSE: NEM), Southern Copper Corp (NYSE: SCCO), US Steel (NYSE: X), AK Steel (NYSE: AKS), Arcelor Mittal (NYSE: MT) all were remaining only fractionally changed in the midst of the buying euphoria.
These basic materials names are an integral part of the market, and it is almost impossible for the SPDR Dow Jones Industrial Average (NYSE: DIA) and SPDR S&P 500 (NYSE: SPY) to hold gains if this sector is underperforming.
This deviation proved to be an indicator of things to come upon the open. Sure enough, right at the bell, all of these names began to sell off heavily, dragging the indices down with them. Fifteen minutes later, buyers began to step in and prices in these equities moved from being down over 1% in some names, to being positive 1% by mid morning. Futures and Indices, as a result, pushed to new highs at around 11:35 a.m. EST.
However, as has been the case throughout this whole week, the market could not finish out a move in either direction and did not provide the death knell to the bears that bulls were hoping for. As a result, another sell-off ensued in the late afternoon, and the overall market ending up closing in the middle of its trading range, commensurately off the highs set earlier in the day.
The basic materials names gave back most of their gains by the end of trading and closed, just like the SPY and DIA, right in the middle of their ranges.
Even oil companies dissented from oil futures' new 52-week high. Schlumberger (NYSE: SLB), Occidental Petroleum (NYSE: OXY), and Halliburton (NYSE: HAL), which all started the day with over 1% gains got sold into starting in the early afternoon. United States Oil Fund (NYSE: USO) closed up 1.34%, near its highs, at $43.17. The same cannot be said for the three aforementioned companies.
Halliburton ended down 1% at $49.34.
Occidental finished out down 0.18% at $104.30.
Schlumberger was the strongest of the trio, as it managed to squeak out a gain of 0.47% to $93.70, still well off of its highs of the day.
So, shake off the whiplash and ask yourself, “What is this market telling me?” It is saying to be nimble and to not fall in love with any particular name or trade. If you are going to jump into the market, be prepared to act quickly. Gains are quickly being sold into, and selloffs are just as swiftly being bought.
Without precise timing and discipline, such volatile movements can leave your account in a lot of pain as weak hands are easily forced out of the market. The safest move is to wait until the market crowns a clear winner before making your play. Whether the bulls or the bears win, there will be a lot of room to profit in either direction.
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