While investors and traders started with a rough day on the market Monday, facing weaker prospects of global economic growth, the tragic events that took place in Boston dominated headlines and fueled a deeper sell-off. In this week’s interview with Toni Turner of TrendStar Trading Group, we ask what her thoughts are on the possible effects of the horrible explosion, as well as her take on the ongoing sell-off.
EQ: Wall Street, along with the entire country, was shocked and saddened by the Boston Marathon explosions that happened during the final hours of trading on Monday. The market itself almost seemed to reflect the type of chaos and panic of such a tragic event. Do you think this could have any longer term implications in regards to sense of stability among investors?
Turner: The market did reflect what was happening as reports of what happened at the Boston Marathon started to hit at around 2:45 p.m. on Monday. I was watching the S&P 500 E-mini futures and the market was holding price support, but then the futures plunged and the volume spiked higher. Of course, because of my experience trading for so many years, I knew instinctively something was very wrong, and I suspected that it was something that didn’t even necessarily have to do with the financial markets. So I immediately turned on the television and found out what was wrong.
Now, if the authorities can find who committed this horrific crime quickly, perhaps the market will be able to absorb this within a week or two. If a resolution is not established rapidly, then the event and all of its ramifications could unsettle investors for some time.
EQ: Gold officially hit a bear market based on last week’s close, and it really doesn’t seem to be getting any better after plunging on Monday. Do you see any help coming in terms of support anywhere soon?
Turner: If you look at a monthly chart of the SPDR Gold Shares (GLD), you can see that it plunged through $150 this year, which means that gold plunged down through $1500 during that time. Many thought it would hold then, but it didn’t. It closed Monday at $131.31, and has support in the zone of $127 to $130, which it established in January and February of 2011. Now, if that level doesn’t hold, there’s more support at $123. There is also quite a bit of support at $113, which is not only price support but also the 50-percent retracement line from the GLD’s lows in 2004 to the highs of 2011. If we go back down and retrace this downtrend that we’re in here, we can see that the 50-percent retracement line at about $113. That should present strong potential support, but if that doesn’t hold…then look out below.
What’s interesting is that in recent history, gold was viewed as a safe haven play and any signs of uncertainty would cause investors to flock to it. Now, with the Boston Marathon event—which could present the U.S. with a new situation to deal with—along with the sequestration drama and the negative U.S. economic reports, as well as problems continuing in Europe, gold still did not get a bid. So it makes me wonder if there’s a new dynamic going on here. Also, we should note that oil fell to levels not seen since July 2012 on Monday as well.
EQ: Two weeks ago, we discussed that traders should be making a list of stocks they’d like to own at a discount. Is now the time to start putting that list to work, or would you advise that a little more patience is in order?
Turner: I’m still compiling my list, and am going to apply more patience, especially in view of what happened Monday in Boston. Also, many of the large financials are reporting this week, and we’re right in the middle of earnings season. I am not fond of catching falling knives. With that said, I will be waiting for Macy’s (M) and J.W. Nordstrom’s (JWN) to see how they play out. I’ll be waiting for US Bancorp (USB), which will be reporting Tuesday morning. I’m also watching Raytheon (RTN), and I’m still watching Bed Bath Beyond (BBBY), noting that it has remained strong, price-wise, and hasn’t fallen with the rest of the market.
EQ: Which sectors or industry groups are you watching closely this week?
Turner: I am watching the Financial Select Sector SPDR (XLF) mainly out of curiosity to see what happens this week with earnings of some of the main players in that field, and we’ll see how that sector performs. I’m also watching the iShares Dow Jones US Home Construction (ITB) and the SPDR S&P Homebuilders (XHB), both of which are homebuilders and housing-related ETFs. I want to see if the homebuilders are overbought here or if there’s potential upside that may resume soon.
I’m also watching the iShares Russell 2000 Index (IWM), which tracks the small caps to see if it completes a head-and-shoulders top-reversal formation here, which I saw possibly evolving on Monday. If that plays out, it could lead the market into a deeper retracement.
