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Stock futures dip red

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After two consecutive days of bullishness, stock futures are taking a rest this morning as S&P futures trade lower by 2.3 points at 1,149. NASDAQ futures are down just 4 points at 1,489, while Dow futures are off 35 point at 10,535.

Fair value for the S&P 500 today is $0.05. HL Camp & Company has their computers set for program buying at $1.45 and set for selling at $-0.95. Fair value for the NASDAQ-100 today is $1.43.

Both the S&P and NASDAQ futures are below fair value, so traders are looking for a marginally lower open for stocks.

Staples reports better than expected earnings

Office supply retailer Staples (NASDAQ:SPLS) $20.00 reported earnings this morning of $0.29, which was 3-cents better than consensus estimates. The company said revenues were at $2.9 billion, whish was less than consensus looking for $3.2 billion. Shares of Staples (SPLS) are trading up $0.55 in pre-market action at $20.55 (+2.75%).

SanDisk gets upgrade

Shares of SanDisk (NASDAQ:SNDK) $18.33, are seeing good upside action this morning in pre-market trading at $19.75 after getting an upgrade by Morgan Stanley to "outperform" from "neutral." This is a stock that we identified as bullish last week on the "bullish triangle" pattern at $16.50. The current vertical count is bullish to $28 and I would not be looking to take profits at this point. Instead, would simply raise stop to break-even in the trade.

Internals strengthening

Yesterday's powerful rally had many of our internal market indicators showing strength as indicated by the bullish percent charts. The largest gain in the bullish percent charts came in the NASDAQ-100 Bullish Percent ($BPNDX) as this market turns "bull confirmed" at 57% (57 of the 100 stocks showing a buy signal on their point and figure charts).

The S&P 100 Bullish Percent ($BPOEX) 74% and S&P 500 Bullish Percent ($BPSPX) 68.6% are also bull confirmed and have been since early last week. The OEX is what we would consider "overbought" above 70% on a longer-term basis, while the S&P 500 is nearing an "overbought" level. While the true range of the bullish percent is 0% to 100%, we would advise traders/investors looking to establish new bullish positions, do so in stocks that trade above their bullish support trends and carry longer-term vertical counts that will keep buyers interested.

The NYSE Composite Bullish Percent ($BPNYA) is still in "bull alert" status and did see a net gain of buy signal. Current reading here is 57.8%.

The NASDAQ Composite Bullish Percent ($BPCOMPQ) remains in "bear correction" status and it too saw a net gain of point/figure buy signals yesterday. Current reading is 48.8%.

Stopped out

Last week I identified three stocks I felt were very good bearish candidates and all three of these stocks Microsoft (NASDAQ:MSFT), Marvel Technology (NASDAQ:MRVL) and Maxim Integrated (NASDAQ:MXIM) all triggered "buy signals" on their point/figure charts and should have triggered stops as outlined here, or in the market monitor on OptionInvestor.com.

All three had very similar technicals and are now looking as if we may have been sucked in on a "bear trap" type of formation. I would exercise caution with each of these if short the underlying stocks as the broader-market bullish percent charts have now turned more bullish. Of the three, I would only be looking bullish shares of Microsoft (MSFT) and Maxim Integrated (MXIM) and would look to avoid Marvell Technology (MRVL) as it has greater exposure to the telecom equipment market.

Jeff Bailey
Senior Market Technician
Option Investor

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