7:30pm (EST)
The bulls made the most of their opportunities and scored their first weekly win in a month as the market moved back towards key resistance levels. Ben Bernanke and China played an important role in helping the bulls get out of their funk, but will it be enough?
Friday’s action was choppy, but there was a little buying in the final hour as the Dow finished with a 40 point gain to settle at 10,211. For the week, the index added 279 points, or 2.8%.
The S&P 500 advanced 5 points to close at 1,091 but fell short of the 1,100 level which will be the battle ground going forward. For the week, the index gained 27 points, or 2.5%.
The Nasdaq jumped 25 points to settle at 2,243, and for the week the index popped 85 points, or 3.9%.
Although the market rebounded, we contribute much of the rise to a short-covering rally and nothing more. The technical picture still looks lousy, and the volume just wasn’t there to push the market past resistance.
Another index we are watching closely, the Russell 2000, added 9 points on Friday to close at 649. However, the index fell below its 200-day moving average earlier in the week, but rallied back to close above it. The 650 area is key resistance from January and moving forward it will represent a test.
As far as the other indexes, we could see a little follow-through on Monday and Tuesday and our top-end ranges remain Dow 10,200-10,300; S&P 500 1,075-1,100; and Nasdaq 2,200-2,300. We have pretty accurate in calling this “range” and we wouldn’t be surprised if the market stretched these levels at a little.
There might me a little “fluff” to the upside but our downside targets remain Dow 9,800 then 9,500. The S&P should test 1,050 again and a break below this level clears the way for 975. The Nasdaq has support at 2,150 then 2,050 but we still feel this index gets hit the hardest and will be at 1,900 over the next month or so.
This week could bring even more volatility as it is “triple-witching” expiration on Friday. Triple witching happens four times a year and occurs on the third Friday of March, June, September and December. It is an event dubbed as “Freaky Friday” on Wall Street.
This is usually a bullish day except for June triple-witching which has produced more negative results over past last decade.
As far as economic news, we get numbers on housing-starts and building-permits for May on Wednesday, and on Thursday the May reading of the consumer price index is due.
On Tuesday, we are eager to see how The Chicago Board Options Exchange does with its initial public offering (IPO). CBOE Holdings will make its debut when many IPOs have been struggling as a result of the current market volatility. However, demand should be strong for this one.
BP’s (BP, $33.97, up $1.19) CEO will be the latest suit-and-tie big wig to face Capitol Hill. Tony Hayward has been asked to testify on Thursday before the House Energy and Commerce committee which has been scrutinizing the company’s actions in the cleanup of the oil spill.
Yesterday, the Coast Guard gave BP 48 hours to come up with a more aggressive plan to contain the leak, and there will also be pressure for BP to setup a reserve fund to pay for everything. Still up in the air is the dividend which is scheduled for payment by the end of the month.
The current environment still favors the bears so we aren’t too concerned with last week’s rally. There are a few key earnings announcements that could impact the market this week, and we will take a look at those companies reporting in the morning.
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Market Flat As Bulls And Bears Battle
Wednesday, June 16th, 2010
1:20pm (EST)
The bulls are taking a breather from yesterday’s strong rally, and the bears are trying to recover. The market has traded lower for much of the session but did venture into positive territory earlier in the day. There is a bunch of headlines news, some good and some bad, and we will try to cover a few of them with today’s update.
In economic news, we mentioned this morning Housing Starts were down 10% and came in at 593,000 units versus estimates for 650,000. Elsewhere, Industrial Production increased 1.2% in May, while the capacity utilization rate came in at 75%. The Producer Price Index dropped 0.3% month over-month in May versus expectations of a 0.5% decline.
International Game Technology (IGT, $18.56, down $1.03) is getting a 55 haircut after Goldman Sachs (GS, $137.58, up $0.68) downgraded the stock to “Sell” from “Neutral”. Goldman downgraded its price target from $21 to $17 after seeing no improvement in slot machines sales until 2012. Casino stocks have been rallying, but the news is not all good for the sector.
FedEx (FDX, $80.47, down $2.54) is down 3% after telling Wall Street it earned $419 million, or $1.33 a share compared to last year’s loss of $876 million, or $2.82 a share. Analysts were looking for of $1.32 a share. Revenue was up 20% to $9.4 billion which was higher than the forecasts of $7.9 billion, on average.
In IPO news, CBOE Holdings (CBOE, $32.51, up $0.02) is slightly higher in its second day of trading as a public company. Shares of the largest U.S. options market closed at $32.49 yesterday after pricing at $29 a share late Monday.
IPO’s can be fun, and some of them can be lucrative investments, Google (GOOG, $503.28, up $5.29) always comes to mind of course, but premium brand names can often be priced pretty fairly based on future growth. CBOE Holdings has that and we will likely be playing options on this stock at some point. We have added the stock to our Watch List, but the options haven’t started to trade, yet.
Although CBOE is a new issue, be careful of buying this one as there is already litigation risk ahead. In early July, a court will decide if CBOE can continue licensing some of its higher margin products that they have exclusive rights to, and the SEC (Securities and Exchange Commission) is thinking of placing fee caps on them.
CBOE makes one-third of its transaction fees from these proprietary index options that they own rights on and their revenues would take a hit if others are allowed to join the party.
As we head to press, the Dow is off by 16 points to 10,388 while the S&P 500 is lower by a point and is at 1,114. The Nasdaq is flat at 2,306.
We will be back in the morning with another full update.
Tags: CBOE Holdings, FDX, FedEx earnings, GOOG, GS, IGT, initial public offerings, IPOs, momentum options trading, option picks, options alerts, stock options trading
Posted in Earnings, IPOs, Market Analysis, Market Commentary | Comments Off