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9:05am (EST)
The market continued its winning ways on Wednesday as the bulls celebrated St. Patrick’s Day with a bang. We mentioned yesterday the Dow was poised to test our near-term target of 10,800 and we almost hit it.
We got some good economic news that helped fuel yesterday’s rally. The Labor Department said the Producer Price Index (PPI) fell by a steeper-than-anticipated 0.6% in February as declining energy prices sparked the index’s sharpest drop-off in seven months.
As a result Dow finished higher for the seventh straight session with all three major indexes settling at new highs.
The Dow finished with a 48 point gain, or 0.5%, and closed at 10,733 after touching an 18-month high of 10,767. If we can break 10-8 then we could easily see 11,000 come into play, quickly.
Not to be outdone, the S&P 500 added 7 points, or 0.6%, to finish at 1,166. Our target of 1,175 will now come into play and then possibly a push to 1,200.
The Nasdaq also notched another 52-week high and actually kissed our 2,400 target. The index settled at 2,389, up 11 points (0.5%) after touching the 2,400 level for the first time since September 2008.
In earnings news, Nike (NKE, $70.88, up $0.50) is getting a lift this morning after the company reporting earnings of $1.01 a share for the quarter, versus $0.99 a share in the same period last year. Wall Street was expecting the company to report a profit of $0.89 a share.
Sales came in at $4.7 billion versus $4.4 billion last year. Analysts were looking for sales of $4.6 billion. Gross margins increased to 46% from 43% in the same period.
There were a lot of nervous traders on Wall Street who were worried about the quarter and future orders. Those fears were put to bed after Nike said worldwide future orders for Nike brand athletic footwear and apparel, scheduled for delivery from March through July, was $7 billion, or 9% higher than orders in the year-earlier period.
Wall Street considers the futures an indicator of future sales and this is why we are seeing the continued strength in the stock ahead of the bell.
Shares of Nike jumped in after-hours trading last night to over $73 and the gains have held as the stock is showing a pre-market bid of $74+. We were all over this trade like moths on a campfire and our subscribers are easily looking at triple-digit profits on a call option trade we profiled yesterday. In fact, it could turn out to be our biggest trade of the year so far once we close it.
As we head to press, the Dow futures are up 16 point to 10,679 while the S&P 500 futures are showing a 1 point gain and are at 1,162. The Nasdaq 100 futures are showing a 3 point pop to 1,937. Current subscribers, check the Members Area for the hot details.
Bulls Push Market To Yearly Highs
Wednesday, March 24th, 2010
9:05am (EST)
“Buy when you are scared to death; sell when you are tickled to death.” - Market Maxim
That was our exact feeling in February after the market stalled in mid-January and was trending lower. From our February 25th, 9am update:
“We continue to feel the current volatility is pointing towards a big move for the market and Greece’s debt is not NEW news. It’s hard to imagine the bulls giving up here and today’s open will be nasty. However, we think there is one more move higher before the Dow fades, and it will be interesting to see how well the bulls battle back this morning.” (END)
At the time, the Dow was at 10,374 and its futures were down 87 points going into the open. By our afternoon update, the index was down 150 points and Wall Street analysts were calling for a break below 10,000. So what did we do? We started looking for call options as a bullish way to play the market.
It was hard for us to believe the rally was really over and first quarter earnings were stellar. However, we knew coming off the “Santa Claus” rally that the bulls might rest which is why we went longer out on some of our option trades in January. We weren’t ready to start buying put options because we didn’t think the Dow would fall below 10,000.
That day, the Dow fell to a low of 10,155. That was 700 points and nearly a month ago. We have been talking about Dow 10,800 and how we could power higher if we got through this level…mission accomplished.
The Dow finished Tuesday with a triple-digit gain, adding 102 points, to close at 10,888. The index hit a high of 10,893 today as 28 of its 30 components ended higher.
Caterpillar (CAT, $62.41, up $2.46), which we had on our Watch List in the Members Area, exploded 4% higher and added some fluff to the Dow’s final outcome.
The S&P 500 closed 1 point under our 1,175 target after adding 8 points, or 0.7%, to settle at 1,174. Next stop…1,200. if all goes well.
The Nasdaq, which has been teasing us by kissing our 2,400 target, finally closed above this level and finished at 2,415, up 20 points, or 0.8%. Tech continues to shine and could be on its way to 2,500.
Of course, that was yesterday and this morning the market has a new set of problems to deal with. Futures were slightly lower but got worse after Fitch Ratings slashed Portugal’s debt rating. Don’t forget Ireland, Greece, and Spain.
There are worries this morning that the economic recovery will be slower than other countries that use the euro, hurting Portugal’s ability to repay its debt. Debt problems in Europe have been one of the few events that spook this market so we will see how much of a role this plays in today’s action.
The market got some good news when the Durable Goods figures were released but futures are still pointing towards a slightly lower open. As we head to press, Dow futures are down 34 to 10,794 while the S&P futures are off 5 points to 1,165. Nasdaq 100 futures are lower 6 by to 1,956.
We have a lot to cover in our Members Area so let’s get to it.
Tags: CAT, Caterpillar, DJIA, option picks, options trading
Posted in Market Analysis, Market Commentary | Comments Off