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9:00am (EST)
The market ended slightly mixed on Wednesday as rumors of the Federal Reserve acting sooner, rather than later, continue to make the rounds. There was an article floating around late Tuesday that the Fed could take action as early as next week which helped provide some of the bounce before the close and the same story was providing some support yesterday.
The Dow advanced 59 points, or 0.5%, to close at 12,676. The blue-chips traded to a high of 12,732 and stayed green all day but finished below the 12,800 level which is what we were looking for. Wednesday’s high was just above Tuesday’s test to 12,730 so resistance is still moving lower.
The S&P 500 dipped a half-point, or 0.03%, to settle at 1,337.89. The index traded to a low of 1,331 shortly after the open but couldn’t crack Tuesday’s low of 1,329. The S&P rebounded off the bottom to test a high of 1,344 but the bears were able to hold 1,350 which is short-term resistance.
The Nasdaq gave back 9 points, or 0.3%, to end at 2,854. Tech traded to a low of 2,839 but never really challenged the 2,800 level as Apple (AAPL, $574.97, down $25.95) found some buyers at $570. The index actually made a few trips into positive territory and made it up to 2,870 before holding 2,850 into the close.
The Russell 2000 added nearly 2 points to finish at 769 while the S&P Volatility Index ($VIX, 19.34, down 1.13) fell 5% to close below 20 again.
The bulls are hoping for another round of quantitative easing but the Wall Street Journal report from Tuesday afternoon was mostly old news that is being rehashed. While there is a chance the Fed could act next Tuesday, which is when they meet, they will probably wait to see where the economy is at in September. Reacting next week would seem like a knee-jerk reaction by Ben Bernanke which is highly unlikely.
Ben Bernanke has been pretty vocal on the lack of effort shown by the zombies who make up our Congress and we have mentioned any bullets he has left will be bb’s. If he does have a bazooka, he isn’t going to use it until Europe does something or goes belly-up. His thinking is that Congress will get its act together before he has to do something but there is a growing feeling the U.S. fiscal cliff could be reached by September as we reach the top of the debt ceiling again.
As long as the rumors are around the Fed might do something, there could be some support which, unfortunately, could extend the trading range we have been in. However, economic news will be heating up over the next 2 days so let’s see where we are at by Friday’s close before we draw this conclusion. Also, if the Fed doesn’t act next week, the earliest they could act afterwards is September so the good news is we should see a break out of the current range by then, or sooner.
Earnings after the bell on Wednesday were mostly upbeat but Moody’s (MCO, $36.05, up $0.29) lowered its rating outlook on 17 German banks to negative following another review of the country’s sovereign debt. Germany is one of the stringer countries in the eurozone so this could be a big deal going forward.
Futures are showing a strong open and look like this as we head to press: Dow (+146); S&P 500 (+17), Nasdaq 100 (+32
Europe on the Brink
Thursday, August 2nd, 2012
12:35pm (EST)
All talk and no action from Mario Draghi leads to a bearish day.
We are going to enjoy today’s selloff and we will provide you specifics of what went wrong in Europe tomorrow morning. We will let the talking heads and Wall Street pros speculate on when or what should have happened from the ECB (European Central Bank) but we are more interested in our current put option trades which are showing strong gains today.
The Dow is down 148 points to 12,822 while the S&P is off 15 points to 1,360. The Nasdaq is lower by 19 points and is right on 2,900. We have mentioned support levels all week for the major indexes and we would love to see the bears crack them by the close. However, we can’t get too excited because the bottom line is we are still in a trading range and tomorrow is a big day for economic news.
Given the recent volatility, we wouldn’t rule anything out but it appears the market is headed lower over the next few weeks and back to the bottom of the current 3-month trading range, or worse.
Subscribers, check the Members Area for the updates and stay on your toes. We may send out another New Trade but we wanted to get this quick update out as we do some homework.
Special Note: We are currently doing chart work and checking the premiums for the New Trade and if we do send out another new recommendation, it will be by 2pm (EST).
Tags: option trading strategies, options trading, stock options consultant, stock trading advisors
Posted in European Union (EU), Market Analysis, Market Commentary | Comments Off