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Tight range of trading continues

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Stocks continue to trade in a relatively tight range and this is somewhat surprising to me. Earlier this morning, when the 5-year YIELD broke below the 4.075% level, I thought we were going to see some type of meaningful move lower in stocks, but that's just not the case.

Stocks aren't surging by any means, but they're hanging in there. Current YIELD on the 5-year ($FVX.X) is 4.048% so we haven't seen a sharp move lower in yield caused by buying in the bond, but we'll have to see how things pan out in through the remainder of the session and early next week.

The Dow Industrials (INDU) is the strongest of the broader market averages today with a 34 point gain at 9,863 (+0.34%) and gains there are being brought on by shares of Home Depot (NYSE:HD). Shares of HD are trading up 6% at $46.68 after earlier comments from the company that it will look to reduce its square-foot growth rate to 14% from 20-22% for the next 3 years and open smaller stores, leading to a 12% square-foot growth rate. The company feels the slower rate should help allow same-store sales rebound over the next year or two, and allow the company to focus on gross margin improvement.

Sector strength is also found in the Retail Index (RLX.X) $886 (+1.23%) as Home Depot (NYSE:HD) accounts for a large weighting there.

One stock bullish traders may want to keep an eye on near-term are shares of XM Satellite Radio Holdings (NASDAQ:XMSR) $11.70 (+3.72%). Keep an eye for further bullishness on a close above $12.12.

XM Satellite Radio Holdings -

The chart pattern of XMSR looks very similar to that found back in mid-May of this year. Back then, the close above the $12.12 level had the stock rocketing higher in the following three sessions. Keep an eye on this one near-term. If we get a reversal back higher in bond YIELDS, that could have bears in the stock running for cover, providing a good surge in demand.

Jeff Bailey
Senior Market Technician
Option Investor

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