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Networking still not working

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While yesterday's stronger than expected consumer confidence numbers bolstered market performance, investor confidence is being shaken once again this morning as networking giant Nortel (NYSE:NT) warned late yesterday that revenue and earnings will fall short of previously lowered estimates for its first quarter. Yesterday, shares of NT finished the session at $16.76 and currently trades near $14.60 in pre-market trading.

Equity futures lower

Equity futures are down sharply this morning with S&P futures down 16 points, NASDAQ futures off 43 and Dow futures lower by 112. Fair value for the S&P 500 for today is $9.46. Computers are set for program buying at $11.84 and set for selling at $7.38. Those wishing to learn more about fair value and program trading can visit www.programtrading.com.

Bond YIELDS down slightly

While it is very important for traders to honor stops on any long positions this morning, I'm noticing that bond YIELDS are down slightly. Fund managers and major institutions are just as aware of Nortel's warning as you and I are and right now the MARKET isn't fleeing to bonds. This could be an important observation as the session progresses. I would not recommend that traders jump in and start shorting every equity in site at the open of trading. If you're going to short/put trade near the open, do it gradually. One group I'd consider is the networking group, but don't overdo it.

JDS Uniphase

JDS Uniphase is expected to release its earnings on April 26 and the stock looks like it will trade at another 52-week low this morning. Swing traders perhaps looking for a lottery play in this stock to the downside on the thinking (if Nortel and warn, JDSU can too) I'd be looking at the MAY$20 put contract (UQDQD) currently offered at $2.12. Don't load up on them, but the stock has hardly budged during the latest three-day rally and there must be a reason.

Jeff Bailey
Senior Market Technician

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