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Equity futures mixed

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Equity futures are mixed this morning with S&P 500 futures (SP01H) lower by 1, NASDAQ futures (ND01H) are higher by 4 and Dow futures (DJ01H) are off 15. Fair value for the S&P 500 today is $14.46. Buy programs are set at $16.58 and sell programs are set at $12.35.

Bond YIELDS continue to fall

On Tuesday I didn't like the fact that bond YIELDS had started slipping again and we're seeing more of that this morning. Traders/investors that are long some technology stocks should be looking to lighten up on positions here and look to do some shorting at the open. As long as the MARKET likes 5.2%, 4,8% and 4.6% YIELDS in the 30-year, 10-year and 5-year treasuries there won't be the needed cash moving into many technology stocks to drive them higher.

30-year Treasury Bond YIELD (TYX.X) - 60-minute interval.

Just after the opening for today's bond market, my alert for lower YIELD was triggered in the 30-year YIELD and this has me looking to play some defense in technology stocks. As long as this bond remains below the 53.19 level and 50-period MA I would be very defensive. I'm now setting an upside alert on my trade station at 53.19 to alert me to any selling in this bond.

Wednesday's "Play of the Day" on OptionInvestor.com

Traders might want to take a look at Wednesday's "Play of the Day" in Broadcom (NASDAQ:BRCM). I can't find a lick of support and my retracement bracket looks like market makers are underwater big time. Traders that put this stock yesterday might find some support at $35 and look to lock in some profits there.

A real time test. Do you Yahoo?

Yesterday, shares of Yahoo Inc. (YHOO) were halted for trading pending news. Now that the "bad news" is out, assume you are a market maker in the stock. Where would you set your bid for the open (a market maker must provide liquidity to the market)? The stock is trading at another 52-week low. Where's support for a stock trading at a 52-week low? Using an "old" downward trend and the retracement bracket, market makers are probably sitting near the $17 level. A market maker that has a big short position in his/her inventory might be a little more aggressive. For subscribers that may be short, I'd be looking to cover at least a half position on this "bad news" and then use the $21.68 level (50% retracement) as my stop on the other half. Any market maker holding a long inventory above that level might be a seller near $21.63 to try and get his/her inventory back down to size depending on how they view the CEO resignation and overall market environment.

Yahoo! (YHOO) Chart - 60-minute interval.

It's only a "guess," but I'm guessing that there was a trading desk or two that "got wind" of bad news coming in shares of YHOO long before it became public knowledge. There's nothing wrong with "lightening up on your bid" if you're a market maker ahead of "bad news" as long as you don't get short and profit from that information. Many times a market maker will lighten up on his/her bid when there's bad news or sector weakness. It's called account management and often times leads to lower prices. I wish I had been watching the above chart yesterday. It would have made for a very nice short/put play.

Jeff Bailey
Staff Analyst

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