The bulls took a few more baby steps at breaking through another layer of resistance on Wednesday but ran out of gas into the close as the market finished lower after spending much of the day in positive territory. There was a little progress made in the tax-break package that’s currently making its way through Congress as the proposed legislation cleared the Senate by a whopping approval of 81-19. The bill still has to make it through one more channel check as the Democrats try to get some sweeteners in the deal.
The Dow fell 19 points, or 0.2%, to finish at 11,457. The index managed to trade to a new 52-week high of 11,519 and we are targeting 11,600-11,700 as confirmation on a run to 12,000. Support is strong at 11,200-11,000.
The S&P 500 dropped 6 points, or 0.5%, and ended at 1,235. The index traded to a high of 1,244 but had its six-session winning streak snapped as we look for a break above 1,250. The bears are targeting 1,220 to get back in the game.
The Nasdaq gave back a little over 10 points, or 0.4%, and settled at 2,617. Tech appears to be trading sideways at the moment but did touch 2,643 and closed within our 2,600-2,700 range for the sixth straight session. We are looking for a break above 2,660, specifically, as a sign that the bulls might push 3,000 while support comes in at 2,500-2,450.
In stock news, BP (BP, $43.86, down $0.58) fell over 2% before recovering a little into the close after the U.S. government said it would sue the company (and others) for damages from the Gulf oil spill. The early estimates are as high as $20 billion in liabilities just from the Clean Water Act alone. Don’t forget about the $20 billion the government has already made BP put in a “fund” that is currently being used for claims.
The news came out shortly after lunch and the options pits exploded as shares traded to a low of $43.29. The BP December 43 puts (BP1011218P00043000, $0.21, up $0.12) opened at 6 cents and jumped over 133% for the day as nearly 10,000 contracts traded. The puts hit a high of 35 cents so some day traders did well by reacting to the news.
Of course, this is really old news because you knew the government was going to push a case to collect damages. In any event, if BP breaks below $40, we will be on an option trade faster than a pit bull on a pork chop as a test to $35 is most likely, according to the chart.
As we head to press, futures are showing a little strength this morning on better-than-expected economic news. We will cover the details in our afternoon update but it appears the bulls are going to push higher. Dow futures are up 7 points to 11,422 while the S&P 500 futures are higher by 2 points to 1,234. The Nasdaq 100 futures are showing an advance of 5 points to 2,206. Subscribers, check the Members Area for the latest trade updates.