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8/8/2012 1:49 PM
Stocks Reaching Resistance
By WSS Research Team
By Carlos Guillen
So far during today's trading session equity markets have continued to trend higher on very little in terms of significant events, economic data, or earnings releases. If anything, stocks should have actually headed slightly down, as indicated by yesterday's market action in the second half of the session when the market lost 47 points from the high, but still ended in winning territory.
Actually, today's trading session began with stocks sliding into losing ground quite fast, but reversed within the first 10 minutes after the opening bell. Since then, stocks have continued to trend higher, leading the Dow Jones Industrial Average modestly higher into winning territory, making today the fourth consecutive day in which market indexes have ticked higher. But how much more upside is there? From a short term technical perspective, looking at the Dow, we can see resistance around the 13,300 mark. This level has been tested several times this year, and every time this occurred, the Dow failed to hold above the threshold and retreated. So, with economies around the world not demonstrating any significant improvements in growth and with earnings season fading away without any meaningful bangs, we expect equities to hit resistance and retreat just as they did earlier this year.
Although data was light today, there was news that German industrial production and exports fell more than expected. Production in June declined 0.9 percent month-to-month, after making a nice gain of 1.7 percent in May, landing below economists' estimates of a 0.8 percent decline. Concurrently, exports fell 1.5 percent in the month after climbing 4.2 in May, landing lower than consensus of a 1.3 percent decline. These bits of data are serving to increase the belief that Europe's largest economy, which is the main pillar of support for the entire zone, is now cooling.
So, despite rather negative indications coming from Germany, stocks continued to move higher. However, we don't see this market action continuing for long and could see a pullback, particularly as upcoming economic data will likely not give a reason for further moves to the upside.
Takeover Percolating in Coffee?
By David Urani
Combing through stocks today, the coffee industry popped on my radar due to some heavy buying activity. A handful of names are trading with higher than normal volumes with some nice mid-day gains, including Coffee Holdings (JVA +9%), Green Mountain (GMCR +6%) Farmer Bros (FARM +5%) and Caribou (CBOU +3%). Yet, in the meantime Starbucks (SBUX -0.6%) is being scalded a little bit.
Of course, it's customary for companies that are being taken over to jump higher, and for acquirers to take a hit. Look out for rumors of a takeover by Starbucks of a coffee business, or perhaps something else like tea or juice. Certainly traders are aware that Starbucks has some cash as it decided to invest $25 million in mobile payment company Square today.
As a side note, this high-profile partnership with Square could really help to jump start mobile phone payments as a popular alternative to cash and cards.
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