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Unemployment remains at 4.5%

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This morning's unemployment data held firm at 4.5% in July, as the industrial sector continues to see the bulk of job losses. The 4.5% rate was slightly better than economist's expectations of 4.6%. Payrolls outside of the farm sector fell by 42,000 in June. A survey of economists called for a 38,000 drop in payrolls. High-tech industries that produce telecommunication and computer equipment have accounted for about 40% of the 632,000 factory jobs lost this year.

Stock futures slipping

Stock futures have been slipping this morning and currently we're seeing S&P futures trade lower by 2 points, NASDAQ futures are off 16 points and Dow futures are unchanged. Fair value for the S&P 500 today is $3.92. HL Camp & Company has their computers set for program buying at $5.39 and set for program selling at $2.75. Fair value for the NASDAQ-100 today is $9.06.

One buy signal short

Not that the NASDAQ-100 is "the market," but it is an index that is a favorite among traders. The bullish percent for this index ($BPNDX)is right back at the 51% level. This is the third time we've seen the bullish percent for this index at 51% and it has been turned away twice before. Is the third time a charm? I think so, but traders should remain relatively cautious for one more day. One reason I think this indicator will get to the "bull confirmed" status soon is the reversals we saw from Wednesday's trading in the S&P 500 ($BPSPX) and the S&P 100 ($BPSPX) to their "bull confirmed" status. In essence, the internals of the patient have improved markedly in the past two weeks. The patient has been walking the hallway and gaining strength. Before long, the patient might just start to run!

NASDAQ-100 Bullish % - 2% box

So close, yet still far enough away to be exercising caution. Yesterday's internals showed a net gain of 3 stocks for the NASDAQ-100 showing a buy signal on its point and figure chart (BEAS, INTC and CIEN).

Stocks as I'd rate as "pivotal"

With the bullish percent for the NASDAQ-100 threatening to go bullish for a third time at 51% there are some stocks to be keeping a close eye on to get a feel for how things are going to shake out. For the market to remain bullish I fell shares of ORCL, MSFT and EBAY are three key stocks to be keeping an eye on. All three stocks are sitting right at bullish support. If the MARKET is truly bullish, these stocks should find sponsorship. However, if the technicals deteriorate much further, it could send the message that this market just doesn't have the will nor the confidence to push higher. I've said before, I learn and profit more from DIVERGENCE than I do similarity. All three of these stocks are "institutional" type stocks and will give us hint of what institutions are doing with their money and how they're thinking about the longer-term. Institutions are all about the longer-term and if these stocks begin showing weakness below the levels specified, it's time to be alert for the potential fading of the rally.

Yesterday in the hot list on OptionInvestor.com I felt that shares of Microsoft (NASDAQ:MSFT) was the best risk/reward trade in the technology area. Bullish support is at $65, but a trade below $64 could be trouble and sign of coming weakness. A trade at $74 puts the stock back on a buy signal and would have the stock contributing 1% to the NASDAQ-100 bullish percent.

Shares of eBay (NASDAQ:EBAY) are sitting right on bullish support at $60. A trade at $59 would be a spread triple bottom sell signal and a trade at $58 could see the stock fall to $55 rather quickly. A reversal higher to $66 would have this stock back on a buy signal and adding 1% to the NASDAQ-100 bullish percent. Good stock to implement a straddle on at the open.

Oracle (NASDAQ:ORCL) is in much the same shape as MSFT technically. While the buy signal back in June at $18 contributed positively to the bullish percent, a trade at $17.50 would have this stock back on a sell signal and trading right on bullish support trend. Last year a fund manager said an investor "has to own this stock" (stock was $40 range). If institutions believe in technology or Oracle for that matter, this stock shouldn't trade $17. If it does, this could be sign of further tech/software weakness. At the same time, this stock also offers favorable risk/reward for a bullish trade. Resistance is clear at $20 level, but a trade at $21 could have the stock unwinding to the upside as that would be a spread triple top buy signal. Good stock to be taking partial position in near support. Stop at $17, then add to position on break above $21.

Subscribers can view all of the aforementioned point and figure charts for free by visiting www.stockcharts.com. Just navigate to the point and figure chart section, type in the symbol, and enjoy the X's and O's. It's a great way to start the morning after you pre-morning market update here!

Jeff Bailey
Senior Market Technician

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