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Equity futures lower

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Equity futures are slightly lower this morning as earnings season approaches. This morning we're seeing S&P futures (SP01M) down 5.8 points, NASDAQ futures (ND01M) are down 12 points and Dow futures (DJ01M) are lower by 55. Today's fair value for the S&P 500 is $8.72. Program buying is set for $10.90 and program selling is set at $6.54.

Yesterday's action

What we did yesterday will help decide what we do today and may also be viewed, as what we thought would happen today. Yesterday we added another 1/2 position short in Amgen (NASDAQ:AMGN) at $57.50 and brought our total short in the stock to a full position as the stock finally started to show some weakness. Current standing there is 1/2 short at $59.12 and 1/2 short at $57.50. What we will look to do at some point in the future is either close out the entire position at once, or cover 1/2 position near the $55 level. Yesterday we also looked to the put option market in shares of Halliburton (NYSE:HAL) as the Oil Service Index (OSX.X) and Schlumberger (NYSE:SLB) were showing weakness and breaking support levels. I liked the May$35 puts (HALQG) at $2.45 offer looking for a short-term trade and further weakness for this stock.

An area to be watching

The weakness we was yesterday in the Oil Service sector (OSX.X) has me thinking that we might start seeing some rotation out of the Natural Gas Index (XNG.X) and this will be a group of stocks traders may want to keep an eye on for a possible downside move today. I'm not sure why the OSX.X and this group of stocks have been getting beat up lately and there are some stocks in the natural gas group that could be the targets of profit taking. It is very tough to try and be shorting stocks in upward trends, but when a broader market is as beat up as this market is, a group that has been in favor can be a very good group to be short if profits start being taken and rotates to some of the more beaten up parts of an industry. It wouldn't surprise me to see some profits roll out of natural gas stocks like Apache (NYSE:APA) or H.S. Resources (NYSE:HSE) and roll into some of the bigger named oil service stocks like Schlumberger (SLB) and Halliburton (HAL). Since I'm short/put (HAL) and currently profitable in that trade, we will be keeping a close eye on things for this group near term.

Jeff Bailey
Senior Market Technician

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