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9:00am (EST)
The bulls got a nasty wake-up call yesterday as the bears punished the market and are gathering strength to do some more damage.
The Dow ended Thursday with a loss of 144 points, or 1.4%, to close at 10,271. All 30 stocks that make up the Dow finished in the red as the index touched a low of 10,202. We mentioned support would come in at 10,200 but that level is likely to be taken out today, if not, next week.
The S&P 500 fell 19 points, or 1.7%, to settle at 1,075 and found support right at our 1,070 target. However, it now appears 1,050 will come into play with a possible test down to 1,000 again.
The Nasdaq declined 37 points, or 1.7%, and closed at 2,178. The index touched a low of 2,168 and it appears the next stops will be 2,150 and then 2,050.
As far as today, the market won’t have any economic news to deal with and earnings are light.
Dell (DELL, $12.04, down $0.15) announced after the closing bell on Thursday and told Wall Street they earned $545 million, or $0.28 a share. In the year ago period, Dell earned $472 million, or $0.24 a share. Revenue rose to $15.5 billion, from $12.8 billion, which topped the $15.2 billion analysts had predicted.
Not a bad quarter on the surface, but Dell’s gross profit margins fell and shares are 2% lower in pre-market trading.
Elsewhere, Hewlett-Packard (HPQ, $40.76, down $0.60) reported earnings of $1.8 billion, or $0.75 a share, versus $1.7 billion, or $0.69 a share, a year ago. Excluding items, the company would have earned $1.08 a share which matched analysts’ estimates. Revenue came in slightly ahead of expectations at $30.7 billion, up from $27.6 billion a year ago.
For the full year, HP expects to match the 4.50 a share Wall Street expects, and have revenue of over $125 billion, slightly higher than the $124.9 billion analysts have on the board.
Despite the relatively decent quarters, futures are pointing towards a lower open. Dow futures are down 37 points to 10,198 while the S&P 500 futures are off by 4 points to 1,067. The Nasdaq 100 futures are lower by 5 points, to 1,814.
Of course, we want the market to go lower because we are leveraged to the short side. Many of our current trades should get another pop this morning. Subscribers, check the Members Area for the updates.
Housing Numbers Disappoint, Market Falls to Support
Tuesday, August 24th, 2010
12:30pm (EST)
Futures were pointing towards a significant sell-off at the open and the bears were ferocious in their attack. The bulls have recovered somewhat as the market is well of its lows but we doubt things are going to get any better.
The major indexes hit their lows shortly after the existing home sales came out at 10am (EST). There was no surprise here as existing home sales fell more than 27% from the prior month to an annual rate of 3.8 million units, marking a 15 year low. Wall Street was expecting sales to fall 12% to a 4.7 million units.
As a result, the Dow is down 85 points to 10,088 but has traded to a low of 9,999. Although the index has recovered from its triple-digit loss, the bears will now target 9,800 over the next few days.
The S&P 500 is lower by 9 points to 1,058 but has touched a low of 1,048. We have been mentioning 1,050 would come into play and all signs are pointing to a test of 1,000.
The Nasdaq is showing a decline of 21 points to 2,138 and is below our 2,150 target. Next stop should be 2,050 but 2,100 could provide a little support. The index has kissed 2,113 today.
In earnings news, Barnes & Noble (BKS, $14.63, down $0.37) continues to unravel like a cheap sweater after reporting earnings that missed analyst’s expectations. They also have no clue what earnings will be going forward as online sales continue to trump brick-and-mortar sales.
The company reported revenue of $1.4 billion but lost $1.02 a share in the quarter. Wall Street was expecting sales of $1.42 billion and a loss of $0.80 a share. Online sales were up over 40% from a year ago, but retail store sales were down 2%.
Looking ahead, Barnes & Noble said for the current quarter they could post a profit of $0.05 or a loss of $0.25 a share. Analysts were expecting a profit of $0.15 a share.
Tomorrow will be another important day for economic news as we get an update on durable goods orders. The bulls will be anxious to see if a slowdown in manufacturing was only temporary but if it wasn’t, then you can almost bet the bears will pounce.
We are releasing our 1pm market update a little early today because we have an important trade update. One of our positions is up over 160% and we are closing half of the trade today so subscribers can lock in profits. We are going to let the other half ride for possible bigger gains but by closing half, we are locking in a nice return even if the other half of the trade were to expire worthless.
We got our subscribers into the put options at $1.03 less than 2 weeks ago and they have hit a high of $3.20 today. Time to ring the register.
We are licking our chops at the current market conditions and we are going to ride the bears’ backs if we continue lower. A number of our other trades are also showing some solid gains but we need to be careful of any positive news. We doubt there will be but something good could lead to snap-back rally which would keep us in this trading range.
We will be back at 9am (EST) Wednesday morning and you can expect a few more trades this week. Subscribers, check the Members Area for the important updates.
Tags: Barnes & Noble, BKS, option picks, RIMM, stock options trading
Posted in Company Commentary, Earnings, Trade Update, Trading Psychology | Comments Off