TradeMaster Daily Stock Alerts Blog

Small-cap stocks were expected to open lower, pulled down by sloppy housing data, recession fears, expiration jitters ahead of the weekend, and profit-taking from short-term players who caught the recovery move Thursday. Outside of housing starts, most of the “fresh” news in the air this morning was actually supportive, with Libor rates down overnight, earnings surprisingly solid and a bullish note from Warren Buffett. Despite those feel-good items, stock index futures were lower before the soft housing report, suggesting a Russell 2000 (NYSE:IWM) opening of about 1% lower, which would equate to an open near 531.00.

The housing starts figure came in at an annual rate of 817,000 units, which was well off the projection of 875,000. The immediate reaction to the housing starts data was that losses in stock index futures were extended, while gains in Treasury market were heightened. The market still will get consumer sentiment data from the Michigan survey later this morning. There is some thought that expirations today will promote choppy, volatile activity.

Inter-bank lending rates (Libor) were lower overnight and have been retreating grudgingly this week, but they still remain lofty relative to typical spread levels.

Most of the big-cap earnings overnight were rosy, with IBM, Google and Advanced Micro Devices all beating the forecast on the tech front, while Honeywell topped the consensus on the industrial front.

Billionaire investor Warren Buffett wrote in an op-ed piece in the New York Times today that he was buying U.S. stocks. He wrote that the market will likely move higher “perhaps substantially so, well before either sentiment of the economy turns up.”

From a charting standpoint, Thursday’s action represented the best price action we have seen in a very long time. The market rejected a run at the recent move lows and closed higher, leaving twin wick bottoms on daily charts. If the market can stage a strong rally today, then it could put some meat on weekly studies, which is important to show that current bottoming action isn’t just some short-term head fake. As for today’s trading, look for resistance at 544 and 558, while support comes in at 517 and 502.

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