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1:30pm (EST)
You can almost feel the tension today between the bulls and bears as the market has stayed in a tight trading range. The major indexes are showing slight gains as better-than-expected numbers on housing and retail have provided the bulls some ammo heading into Friday’s update on employment.
DJIA 15-Minute Chart
The National Association of Realtors said contracts to purchase homes rose 5.2% in July after hitting a record low in June while factory orders climbed 0.1% in July.
The monthly report on jobs will be the biggie, of course, and it will be released before the market opens. Although there is a little hiring going on in America, the numbers are expected to indicate an unemployment rate of 9.6%, up 0.1% from last month. The market will be counting on the private sector for growth but they only hired 40,000 workers last month.
In corporate news, Hewlett-Packard (HPQ, $39.34, up $0.13) raised its bid to $33 a share for data storage provider 3Par (PAR, $32.85, up $0.77). Dell (DELL, $12.40, up $0.28) had upped its offer to $32 a share in a last gasp effort to “outbid” HP but they don’t have the cash coffins to trump $33.
As we head to press, the Dow is up 2 points to 10,270 while the S&P 500 is advancing by 4 points to 1,084. The Nasdaq is showing a 10 point gain and is at 2,187.
We are watching the 1,075 level for support on the S&P 500 with 1,100 being a ceiling for today. We should probably stay within that range for the remainder of the day but a break above or below these levels means somebody knows something ahead of tomorrow’s big news.
We established 3 new positions ahead of Friday’s unemployment report but we protected ourselves by going out until October with our trades. You can bet tonight will be an uneasy night of sleeping but this is why we play the game. Subscribers, check the Members Area for the updates.
Bulls Looking for More
Thursday, September 2nd, 2010
9:05am (EST)
The market started off strong on Wednesday and got more mojo as the day wore on. The bulls were hungry after losing the past two weeks to the bears and they were down this week before they staged an impressive rally that pushed the major indexes past previous resistance levels. It also put the bulls in control as they are positive for the week but yesterday’s action could be a classic ”bear market trap” or the start of a rally back to the upper end of the current trading ranges.
The first day of September has usually been bullish so we weren’t “shocked” by yesterday’s rally; just the magnitude. The last time the market had a 3% gain on this day was back in the late 90’s when the S&P rallied 3% and 4% in back-to-back years. Of course, this was the start of the internet boom that eventually took the Nasdaq to 5,000. We all know how that story ended.
So, to make a long story short, we kept our emotions in check.
The Dow finished Wednesday with a gain of 255 points, or 2.5%, to close at 10,269. All 30 companies that make up the index saw their shares rise. After making a FRESH 52-week low of $12.18 on Tuesday, Bank of America (BAC, $13.21, up $0.76) was the Dow’s biggest winner as shares surged 6%. Now that the index has crossed 10,200 the next level of resistance will be at 10,400.
The S&P 500 popped 30 points, or 3%, to finish at 1,080. The index ran a little past out 1,075 target which means a run to 1,100 could be in the cards. This is where major resistance comes and we will be very surprised if the bulls can bust through this brick wall.
The Nasdaq also banged out a 3% win, rising 63 points, to close at 2,176. The next stop for the index could be a test up to 2,200-2,250 and Tech is going to make or break this market environment.
Now, what does this mean for the rest of the week?
Futures are pointing towards a slightly higher open but we are expecting today to be a “flat” day as neither the bulls or bears will be willing to bet the house ahead of Friday’s key nonfarm payrolls report which will be released before the market opens for business.
The ADP report from yesterday can offer good clues as for what to expect which means the jobs report will deliver some bad news. But what if the numbers are “better-than-expected”? Then the rally could continue. One thing for certain, we would almost bet the house that the Dow is going to move triple-digits tomorrow.
The other thing we are pretty certain about is that the market will rise on Tuesday. The day after Labor Day is usually pretty bullish.
Given this research, it can play out one or two ways.
The first, the market stays flat today and rallies on Friday and Tuesday on good employment news and history.
-OR-
The market gets a terrible number on Friday, tanks, and there is a little love on Tuesday for the bulls.
Also, watch for the CBOE Market Volatility Index (VIX, 23.89, down 2.13) to test 21-22 if the rally continues. Despite yesterday’s big drop, the VIX soared nearly 11% in August and could trade down to these levels if the rally continues for another week or so. The longer-term trend (over the next 6 weeks) is lower as there was been no follow through on the recent rallies here and there.
We go a little more in-depth about the current market conditions inside our Members Area as we have quite a few NEW trades we are targeting. We like to use our “Watch List” as a way to “target” great entry prices on option trades we may be considering and yesterday’s rally could have been just what the doctored ordered.
As we head to press, Dow futures are higher by 8 points to 10,280 while the S&P 500 futures are up a point to 1,083. The Nasdaq 100 futures are showing a 3 point pop to 1,823. Subscribers, check for the updates.
Tags: bac, option picks, option trading alerts, stock options trading, VIX
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