The bears have been dropping hints for 2 weeks they are ready to come out of a long hibernation and today’s action is signaling further weakness ahead. The indexes are still holding the bottom of their December trading ranges and have bounced off their lows but the blue-chips have dipped below an important number today that bears watching. Pun intended.
Here were our comments on Wednesday afternoon:
“The 2 numbers we are watching this week are S&P 1848.36 and Dow 15,703. A break above or below either of these numbers could set the next MAJOR trend while anything in between keeps the trading ranges intact.” (END)
We will talk about the importance of the S&P 500 NOT clearing 1,850 and the seriousness of the Dow falling below 15,700 today in our Weekly Wrap along with the chart work.
We have talked about this week offering the best clues on the next major trend and so far all signs are favoring the bears. The bounce off the lows could be one last test to prior support that will now serve as resistance and today’s close will be important.
If the bulls hold current levels there is a chance the trading ranges stick for another week or 2 but we have mentioned February is a tough trading month and is usually the weakest link in the “best 6-month” bull cycle that started in November.
In earnings news, PulteGroup (PHM, $20.71, up $0.94) shares are up 5% after the company reported Q4 numbers of 57 cents a share versus expectations for 44 cents a share. Revenue of $1.66 billion came in just shy of forecasts of $1.68 billion as PulteGroup ended 2013 with a backlog of nearly 5,800 houses with a value of $1.9 billion.
There have been a few upgrades to the stock as the suit-and-ties jump back on the bandwagon but we have been calling for a run for $22 for a month. Hopefully, shares can get there by late February as we have a current call option trade on PHM.
As far as the indexes, the Dow is declining 117 points to 15,730 while the S&P 500 is lower by 8 points to 1,785. The Nasdaq is down 13 points to 4,110 and the Russell 2000 is off 4 points to 1,135. The VIX is flat at 17.39 (down 0.10) but has kissed 18.99.
It has been a good month for us as we have gotten off to a 15-1 start for the year with a number of big winners. With the Dow down 6% YTD, we are pleased to say we have returned our subscribers a triple-digit return on closed positions. While we may get caught with a few trades trying to call a market top, we would LOVE to see a nasty correction because we always remind you that put options can make the same exciting returns in a DOWN market as call options can in an UP market. Take a look at our 2008 Track Record and you will notice a bevy of put options we used to play the market correction 5 years ago. In fact, take a look at all of our track records as you will see we have never had a losing year.
We will be back Sunday night with the Weekly Wrap and Monday morning with the Daily but we could have additional updates into the close. We do have a New Trade we are getting into today as we continue to build our next “batch” of trades and if the bulls can’t hold the rebound off the lows, we may add another trade we are watching.
Until then, have a great weekend everyone and Go Broncos!