Option Investor
Market Updates

Stock futures mixed

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Stocks look like they are set for a mixed open this morning after a mixed session yesterday. Currently, S&P futures are higher by 3.5 point, NASDAQ futures are higher by 14 points, but Dow futures are down 4. Fair value for today is $9.56 and will not change during the day. Computers are set for program buying at $11.94 and selling at $7.18.

Bond YIELDS show little change

This morning, bond YIELDS are showing little change after having risen sharply in the previous two sessions. Current YIELDS stand with the 30-year YIELD at 5.360%, 10-year YIELD at 4.851% and 5- year YIELD at 4.503%.

Yesterday's low volatility option play in IP

Yesterday's low volatility option play that traders may have opened in International Paper (NYSE:IP) for the April$35 calls (IDDG) were closed for a 25% gain in the "Hot List" yesterday. I wanted to update subscribers to other sites that we closed this trade because of the stalling of yesterday's momentum for the equity markets. However, this morning's current bid for this contract is 10-cents higher than where we closed our trade yesterday. I just wanted to let those readers not watching the hot list on PremierMarkets.com know we closed the trade.

What to look for today

Yesterday, I thought the trading session was going to be much stronger than it eventually turned out. Traders that were watching our hot list probably noticed that we were opting for small profits in many of the stocks we had been holding for a couple of days. Some of the trades hit our targets, while others fell just short of our bullish targets. Instead of risking the erosion of profits for long positions, we booked those profits to see what develops. Currently the equity and bond markets look to be at a major decision point short-term. Yesterday's activity tells me that there still doesn't look to be a lot of new bulls in the market place that are eager to bid up prices for stocks. It looks like many investors have been burned too often in some of the recent rallies and are hesitant to make commitments to stocks for an extended period of time. With this type of action, traders really need to keep an eye on bond YIELDS. If YIELDS start falling from current levels then stocks could very well show some weakness. I do think we're going to see some pullback in YIELDS here short term. As it relates to bonds, we've seen a fairly decent sell-off in the price of bonds and much like a stock, bonds will also get a bounce and YIELDS will rise.

What traders should be doing

What traders should currently be doing is what I think we've been doing on PremierMarkets.com. Taking profits when a stock hits your upside target level and aggressively raising your stops under those stocks you're long/call. Traders should also be identifying stocks that have made nice moves to the upside and perhaps look overextended from support. These may very be the next big winners that money is committing itself to in the near- term. Look for these types of stocks to pull back to a level of support where a bullish position can be taken on a firming bond YIELD, where support for the stock is nearby. Institutions don't just buy and keep buying. They work a stock. They will buy to a level, then stop buying, wait for the stock to pullback into a range and then begin buying and accumulating again. Many fund managers have gotten "burned" just like individual investors over the past several months and they're not going to be chasing stocks either.

Closed plays for 3/26/01
Yesterday we closed out 4 of our trades on PremierMarkets.com
International Paper (call)   21.8% gain.
Informix                      5.4% gain
Worldcom                      2.9% gain
Utility Index (put)          0.87% gain

Jeff Bailey
Senior Market Technician

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