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Stock Futures Higher

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Stock futures are slightly in the green this morning, with Dow futures up 21, Nasdaq futures 11 points higher, and the S&P 500 up 2.30. According to HL Camp and Company, fair value for the S&P 500 is $5.67. Buy programs are set at $6.92.

If stocks are going to move higher this morning, they are going to have to look past a series of earnings warnings.

Boeing (BA) announced that it would lay off 20,000 to 30,000 workers, or almost one third of its commercial aviation workforce, due to an anticipated drop in commercial jet orders. The company had previously forecast 520 deliveries in 2002, but now expects that number to be in the low 400s.

Eastman Kodak (EK) is starting to see the affects of a weakening global economy. The company now expects to post a profit of 65 cents per share instead of the original forecast of 90 cents to $1.20.

Adobe Systems (ADBE) missed third quarter revenue targets, and lowered Q4 earnings to 27 cents from 31 cents. The company cited weakness in Japan as a major factor in the reduction. Adobe is trading $2.10 lower before the open.

The trade gap narrowed to $28.8 billion in July, but bonds are unaffected by the news. The yield on the 30-year is up 0.72, and the 5-year yield is down 0.29.

Europe is posting mixed results this morning. The German DAX is up 0.81%, but France and the U.K. are down slightly. The Nikkei closed up 2.69% in Japan.

Jeffrey Canavan

NASDAQ-100 bullish percent

The NASDAQ-100 bullish percent (percent of stocks comprising the NASDAQ-100 currently showing a buy signal on their point figure chart) is approaching the 0% level. It may not get there, but is does give hint that there has been one heck of a lot of damage done to this portion of the market.

Bearish traders that are still holding some positions short/put need to understand that risk/reward is currently less favorable for adding new positions as a snapback rally could occur at any point.

NASDAQ-100 Bullish Percent ($BPNDX) - 2% scale

On a quantitative level, the NASDAQ-100 is more oversold now than it was back in late March of this year. There's enough bad news and uncertainty in the markets right now to choke a 6,000 lb. horse! I surely don't expect this indictor to reverse course and head back to the 70% level in a day or two, but think about this.

Trying to pick a bottom by bullish investors right now is very difficult as it is next to impossible to assess downside risk. For many stocks you almost have to pick a number out of the air or look at some 6-year charts to find support.

Traders that only trade bullish should turn the tables for a minute and try to think "the other side." If downside risk for a bull is uncertain, then how does a bearish trader assess his/her upside (potential price decline)?. That too is just as difficult to assess isn't it?

Those that have traded long enough know that they must stay disciplined and not let "outside influences" or perceptions of doomsday control their investment strategies.

If you're a bullish trader that has nearly extinguished his/her financial resources, then by all means don't continue to poor any more funds into the market. Instead, try concentrating your efforts on hedging some positions or cutting some stocks from the portfolio that present the most amount of risk to your financial well-being.

If you're a bearish trader and have been bearish for several trading sessions, be careful not to get "overly bearish" at oversold levels like we're in right now. There are times when an inexperienced bearish trader just continues to add to positions, and then when the markets rally they start getting nervous. They then try and "hold steady" as things continue to move against them (as older bears continue to lock in gains on the rally as they cover positions). Eventually the bearish trader that shorted at a high-risk level for them (like current bullish percent levels) finally gives in and covers his/her positions that they shorted at an inopportune time for a significant loss. The key point right now for a bearish trader is to not get too bearish and be willing to cut some losses rather quickly should the trade move against you.

Jeff Bailey
Senior Market Technician

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