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Retail Sales drop 3.7%

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Retail sales dropped 3.7% in November after showing a 6.4% gain in retail sales. In the recent month of November, auto sales dropped 11.9% after soaring 24.2% in October. Excluding autos, retail sales fell 0.5% in November after rising 0.8% in October. Excluding gasoline and autos, sales rose 0.1%. In the past year, retail sales are up a modest 3.5%.

Jobless claims fall by 86,000

The Labor Department reported that weekly initial jobless claims fell by 86,000 in the latest week to 394,000, marking the largest drop in nine years. Continuing claims rose 36,000 to 3.66 million.

Producer prices fell 0.6%

Producer prices fell 0.6% in November, with the core rate of prices increasing 0.2%. This is just one part of the "inflation" puzzle that still shows there is little inflation at the producer level.

Stock futures lower

Today's economic data has stock futures indicating a lower open for stocks. S&P futures are trading lower by 8 points at 1,129. NASDAQ futures are down 28 points at 1,639 and Dow futures are falling 75 points at 9,825. Fair value for the S&P 500 today is $1.88. HL Camp & Company has their computers set for program buying at $3.24 and set for program selling at $0.32.

Bonds higher

Treasury bonds are bid higher in early trading after this morning's mixed economic data. YIELDS on the 30, 10 and 5-year are all lower, while the shorter-term 13-week is unchanged at 1.64%. The action in the 10-year YIELD takes it back below its 200-day moving average, so bullish positions in stocks near the open should be taken with great caution.

Ciena bid lower

Today, Ciena (NASDAQ:CIEN) reported fourth-quarter earnings of 5 cents a share, which was inline with estimates. Revenues came in at $367.8 million, which was slightly lower than estimates of $369.3 million. The company's CEO Gary Smith said that the company would pursue a business strategy of sustained investment in its business, even though the economic environment has many of its competitors retrenching. Mr. Smith said that the continued investment will most likely have the company experiencing operating losses. Yesterday, shares of Ciena (CIEN) finished the trading session at $16.41 and are trading $15.02 in pre-market action.

Longer-term call option play

For subscribers looking for a longer-term call option play, take a look at the TranSwitch (NASDAQ:TXCC) May02 $5 calls (TZQ-EA) that were offered $2.05. Four sessions ago, this stock traded BIG volume of 15.4 million shares as stock jumped from $4.69 to $6.38. I've seen this type of action before and hints that some longer-term money is either covering a short or getting bullish. This is more of a "lottery" play right now, so not recommending a stop. ONLY INVEST what you can afford to lose. 1 contract is 100 shares and would cost approximately $205.00 (excluding commissions). I would have preferred a LEAPS option, but unfortunately, May is furthest out expiration. Relative strength vs. S&P 500 recently gave a "buy signal" and yesterday's action had RS chart reversing back into X's. This is same type of relative strength confirmation as we've seen in Medtronic (NYSE:MDT) near $44 and Cendant (NYSE:CD) near $15.

An action point for a longer-term play would be a break above yesterday's high of $5.88.

Jeff Bailey
Senior Market Technician
Option Investor

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