Stock futures are edging higher this morning with S&P futures trading higher by 4 points, NASDAQ futures are up 25 points and Dow futures are up 18. Fair value for the S&P 500 for today is $7.42. That price will not change during the trading session. Computers are set for program buying at $9.01 and set for selling at $5.73. Fair value for the NASDAQ-100 today is $15.48.
NASDAQ-100 gaining strength, but caution still advised!
It has been a couple of day's since we first gave traders in the QQQ and the NASDAQ-100 the "bull alert" call and yesterday's action had the bullish percent adding more X's. Current status is still "bull alert" and it would take a reading of 52% to get this index and indicator into a "bull confirmed" status.
NASDAQ-100 bullish percent chart - 2% scale
The NASDAQ-100 bullish percent chart is often times the first bullish percent chart we see reverse course (up and down). Yesterday the internals improved markedly and gives hint that strength is building and this patient is starting to feel better. Perhaps the Fed's most recent dose of medication in the form of a 25-basis point cut was administered at just the right time and proper dosage.
The bullish percent chart for the S&P 500 remains in a column of O's at 53.7% after having reached a level of 74% in May. This indicator is telling us that we are not yet seeing any type of internal strength at this point from the S&P 500 at this time. As it relates to the NASDAQ-100 bullish percent think of it this way. The NASDAQ-100 is just 100 stocks and it is "easier" for the bullish percent to be whipped around. We like to use the NASDAQ-100 bullish percent as an early alert indicator and then look for the S&P 500 to follow. Right now we're not seeing the internals improve in the S&P 500, thus our word of caution for traders to be very selective and manage their trade size!
Microsoft Chart - $1 box
In early April (red 4) at the OptionInvestor.com Expo, we actually learned how to calculate the bullish and bearish vertical count technique. We noted that the bullish vertical count indicated a bullish price objective of $75. I asked the question during my presentation, "what do you think might have the market thinking this stock could trade $75 at some point in the future?" One attendee shouted out, "a favorable court ruling from the justice department!" Now that the $75 bullish price objective has been met, we see that the stock is back on a buy signal and its new bullish count indicates a bullish price objective of $95. I'll pose the question once again... "What do you think might have the market thinking this stock could trade the $95 level at some point in the future?" Actually, we didn't need to know the answer the first time, and we don't really need to know now. All we need to do is keep our head, trade our observations and manage our risk. Everything else takes care of itself. First sign of trouble is a trade at $66.