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8:45am (EST)
The bulls played defense for much of Monday’s session as the bears pounded away at lower support levels. For the first time in weeks, oil took a back seat as Japan’s devastation and hardship played a major role in yesterday’s drop. Although there was some strength into the close, the major indexes closed slightly below support.
The Dow fell 51 points, or 0.4%, and settled at 11,993. The index touched a low of 11,897 and gained 100 points off the bottom after our midday update. We mentioned in yesterday’s brief there was further support at 11,800 if the Dow dipped below 12,000 but a continued close below this level would not be good.
The S&P dropped 8 points, or 0.6%, to finish at 1,296 after kissing 1,286. There is near-term support at 1,275 but a print below here would likely lead to 1,250.
The Nasdaq got smacked for a 14 point loss, or 0.5%, and closed right on 2,700. The index traded down to 2,682 with 2,650 providing the next layer of support. A break below 2,650 could lead to a test of 2,500.
There were a few pluses in a day full of negatives. For one, there was a nice bounce off the lows into the close. Two, volume was unusually low compared with other sell-offs which has been accompanied by high volume. And three, the CBOE Market Volatility Index (VIX, 21.13, up 1.05) stayed below 23.
None of that matters now but it was just enough to keep the bulls hanging around ahead of this morning’s ambush.
Futures are pointing towards a nasty open as Japan faces a possible nuclear catastrophe after a third reactor exploded. The country has issued a warning for people to stay indoors to avoid radiation exposure.
It is hard to prepare for these types of events in the market but we have been telling you that the volatility was going to explode. Although we were looking for one last bullish run this week, the bears are going to crack another layer of support and those thoughts are quickly fading.
As we head to press, Dow futures are down 272 points to 11,654 while the S&P futures are getting hammered for a 38 point loss to 1,253. The Nasdaq futures are getting crushed by 70 points and are at 2,220. It’s going to be a sea of red at the open, folks.
Market Pushes Higher
Tuesday, March 9th, 2010
1:00pm (EST)
The bulls are back in the driver’s seat despite any real catalysts to carry them forward. There are still some notable earnings releases due out this week and the economic news will pick up on Thursday and Friday but momentum can’t be denied.
As of now, the Dow is currently enjoying a 45 point gain and is at 10,597. The S&P is up 5 points to 1,143 but the Nasdaq keeps pushing the envelope. The index is showing an 18 point pop and is 2,350.
Our little quote this morning on bull markets was meant as a reminder that we haven’t seen the euphoria yet. There is still plenty of pessimism on Wall Street but we have been in the bulls camp over the past few weeks and have made some nice trades. We still have some headwinds the market is facing but the trend is still up.
With so much going on, we wanted to give a quick update on the CBOE Volatility Index (VIX, 17.76, down 0.03). For our new subscribers, if the VIX is at 30 or more then it means the market is nervous. If the VIX is under 20, the market is confident.
Back in mid-January when the market was at its highs the VIX was at 17. A month later, the index was back near 30 as the market traded back down to the lower end of this current trading range we have been in. The 52-week low is 16.86 and the VIX will drop if the market continues to rally.
It doesn’t mean any rally will stop if the VIX hits these levels, and in fact, we are looking for the VIX to trade below 15 if we can get a market breakout.
And finally, many of you know our thirst for the BioTech and the Drug sector as these can be some of the most explosive option trades on the planet.
This Friday, there is a big FDA announcement that is expected concerning the first ever “once-a-week” diabetes drug Byetta. There will be several stocks that could move on the news but the one we are watching is Alkermes (ALKS, $13.15, up $0.70).
We aren’t sure if there is an option trade here, either a call or a put, but we are watching the developments. Our portfolio is already at its limit but we always keep trades on our Watch Lists. Current subscribers, check for the Members Area for the updates.
Tags: ALKS, CBOE Volatility Index, option picks, option signals, options alerts, stock options trading, VIX
Posted in Company Commentary, VIX | Comments Off