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Still mixed, but rather bullish

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After an higher, then lower, and then again higher type of market action this morning, stocks are holding near their highs of the session, but trading remains rather mixed.

The Dow Industrials (INDU) currently holds onto a 69 point gain at 8,525, but has yet to pierce this morning's earlier high of 8,553. Dow breadth is positive with 21 components showing gains versus 9 stocks declining. Gains are being led by the multinational banks as Citigroup (NYSE:C) $33.20 +5.17% and JP Morgan (NYSE:JPM) $25.49 +6.03% benefit from this morning's news that the IMF was loading Brazil $30 billion dollars, and lifting some worries of bad debt exposure to both Citigroup and JP Morgan.

On the downside, retailing stocks Home Depot (NYSE:HD) $26.64 -5.73% and Wal-Mart (NYSE:WMT) $47.32 -2.19% exhibit weakness after electronic retailer Best Buy (NYSE:BBY) $19.40 -37% slashed its second-quarter outlook, saying it now sees EPS of $0.17 to $0.21 versus previous guidance of $0.30-$0.32 a share. BBY said it expects same-store sales to be modestly positive versus prior guidance of +4%. BBY believes declines in consumer confidence led to the sharp drop off in sales in July. Other electronic- like retailers have Ultimate Electronics (NASDAQ:ULTE) $8.05 -38%, Circuit City (NYSE:CC) $13.25 -11.6% and Radioshack (NYSE:RSH) $23.86 -3.43% showing losses. It's notable that Radioshack has rallied back from an earlier low of $21.70.

On a broader scale, the S&P 500 Index (SPX.X) 888.97 +1.39% is just now breaking to a new session high, and could lead other market averages higher as bears appear to be getting more jittery and aggressive with short covering. This intra-day action brings the recent relative highs of $911 into play, which were found on July 31st. Traders will begin monitoring the 19.1% retracement of $872 as support.

S&P 500 Index Chart - Daily Interval

Stocks look higher as we approach the last half of the session. The broader S&P 500 has broken to an intra-day high and bears are most likely stepping up their short covering and assessing near- term risk back to the 911 level. Good correlation may also be found higher yet at the declining 50-day and 38.2% retracement level of 944. As such, I've personally had some put option in General Electric (NYSE:GE) $31.52 +2.50% and Amgen (NASDAQ:AMGEN) $47.49 +3.87% "shoved" down my throat, so I'm not looking to add any new bearish positions right now and taking a more cautious outlook from the bearish perspective.

Breadth remains a rather mixed picture between the NYSE and NASDAQ. Positive breadth on the NYSE has advancers outnumber decliners by a 3 to 2 margin, while breadth remains rather negative at the NASDAQ, with decliners having the upper hand by a 5 to 3 margin.

New highs versus new lows has 72 stocks hitting new lows on the NYSE versus 27 new highs, while the NASDAQ shows 98 stocks at new lows versus just 13 new highs. This hints that there is most likely more "buy side" influence in the 1, 2, and 3-lettered NYSE listed stocks, and perhaps the "safer" bets for bullish traders to be looking.

Jeff Bailey
Senior Market Technician
Option Investor

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