Today's market action wouldn't necessarily be describers as "volatile," but it has had its ups and downs. At 12:30 PM EST, the Philadelphia Federal Reserve's "Philly Fed report" was releases and showed the monthly index fell to 9.1 in May from 12.3 in April, indicating moderation in the improvement. Economists were expecting the index to rise to 14.3 in May. The Philly Fed index has been above the zero level for five months.
The diffusion index of current activity remained positive in May, although it decreased slightly from 12.3 in April to 9.1. The percentage of firms reporting increases in business activity (29%) exceeded the percentage reporting decreases (19%) for the fifth consecutive month.
Most of the broad indicators remained positive. If you'd like to view the report, please visit http://www.phil.frb.org/files/bos/bos0502.html
Utilities under some pressure
Utilities are under some pressure today as the Utility Index (UTY.X) 326.48 -2.15% sees declines. I think the major negativity here is continued concern regarding some fallout from Enron.
Earlier this morning in the market monitor on OptionInvestor.com we noted a Wall Street Journal article concerning an S&P compiled list of highly rated company's that S&P had flagged as having some potential "cash crunch" issues if certain clauses in their financial agreements are breached. Examples given were debt downgrades or weakness in share price that may have some companies being forced to pay back millions of dollars in debt, or taking other measures to pay back or leverage with assets prior debt obligations.
Stocks mentioned as potential "cash crunch" candidates were stock symbols ILA, BKH, DYN, GP, HAL, MIR, PGO, PCG, RTN, RRI, SEN, TYC, WMB and V.
On May 25th in the 01:00 intraday update on both premierinvestor.net and OptionInvestor.com in "Houston, we may have a problem", when we alerted traders to weakness in shares of Dynegy (NYSE:DYN) at the $21.00 level. With Dynegy (DYN) now trading $7.77 it appears that there may indeed be some further fallout or concern in some of the commodity traders of natural gas and electricity.
I'm still doing some point and figure work on the charts discussed in the S&P report and looking for stocks where it would appear the MARKET is also concerned. In essence, giving major sell signals and charts where vertical counts are extremely bearish.
Not every stock in the S&P report is reflecting bearishness, but it does create a potential scenario of further negativity for those stocks with overly bearish technicals from their point and figure bearish counts.
One stock I'm doing some work on is Aquila (NYSE:ILA) $14.75, where a break of $14 would be a new 52-week low. The stock did exceed a prior bearish count of $22, but an alarming triple- bottom sell signal at $21 created a very long and bearish column of O's to $14.50, which hints that the MARKET is very defensive toward the stock.
At the point, I don't know what some of the "triggers" are on the different stocks. Is it price of the shares? Is it debt levels? Is it potential S&P ratings on debt? Without this information, then trader should trade as they normally would. Disciplined!