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Market action mixed

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Stocks have been bouncing around the unchanged level for the first 90-minutes of trading, but we're seeing some selling in the Treasury market this morning. This is something we felt needed to happen for stocks to have a chance to further extend some gains found last week. We're also monitoring foreign currencies against the US$ to try and ascertain just where the money being freed up from bonds is going. Is it going to stay here in the U.S. and rotate toward stocks, or is it going to move abroad and seek some "safety" with the U.S. launching counter attacks in Afghanistan?

This morning's weaker US$, though not to a great extent did show some hints of market nervousness as the US$ did lose some ground against major currencies. One currency we like to watch is the US$/Swiss Franc relationship. Immediately after the attacks by terrorists here in the U.S. we noted how the Swiss Franc had jumped markedly vs. the US$. We're seeing some strength this morning in the December 2001 Swiss Franc futures (sf01z) to the 0.622 level, but have not seen a break above our 80.9% retracement level of 0.6226. While we're very close to breaking above this level (a short-term cause of concern) we're not there yet. Many of the above commentary or scenario's are available to subscribers in the archive section or traders corner sections of the web site.

Microsoft down 3% after two pieces of bad news

Shares software giant Microsoft (NASDAQ:MSFT) are trading down 2.85% to $56.35 after the U.S. Supreme Court declined to hear the company's appeal for a new trial in its antitrust case. There are also rumblings that SoundView Technology is making cautious comments on shares of MSFT saying that the software maker is extending its transition period for Licensing 6.0 program to June 30, 2002, hinting of poor execution by MSFT and putting December quarterly revenues at risk.

Microsoft Chart - last nine months

In Friday's market wrap for premierinvestor.net and then in the "Market Monitor" on OptionInvestor.com I thought the current field position (50% retracement) for MSFT made for an attractive strangle. An October strangle would constitute the buying of the Oct $60 call (MSQJL) and the Oct $55 put (MSQVK). A November strangle would have a trader buying the Nov. $60 call (MSQKL) and the Nov. $55 put (MSQWK).

Jeff Bailey
Senior Market Technician
Option Investor

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