Option Investor
Market Updates

Industrials down 200 points

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We've seen a two sell programs hit our premium execution level of $-1.30 in the last couple of hours and that has also found stocks seeking out their session lows. Trading curbs are now in as the Dow Industrials have given up more than 180 points from their previous days close. Trading curbs will remain in place unless the Dow Industrials (INDU) 8,852 -2.2% recover back to within 90-points of yesterday's close of 9,053.64, which would be the 8,963.64.

The last computer sell program came just minutes after we noted the 10-year Treasury YIELD ($TNX.X) 4.28% edged below its 50-pd MA on the 60-minute interval chart. While I don't view this as "overly negative" it certainly hints that market participants are indeed taking a more cautious approach into the weekend. Bond talk was that there was some extensive short-covering in the 10-year Treasury today along with some central bank buying driven mostly by Asian banks.

There may be some concerns about a potential U.S. lead strike against Irag, but that's about the only explanation I can think of for today's defensive posture from both the bond and stock markets.

A quick check of the Crude Oil futures market has the December Crude Oil futures (cl02v) $28.63 trading down 21-cents today (-0.72%)

Traders have been asking if I (Jeff Bailey) would hold bearish trades over the weekend. This is a question best left to the trader that holds the trade as it relates to their own account management practices.

If a trader is day trading some positions and perhaps shorted $10,000 worth of an equity, but would normally not carry over more than $5,000 in short versus long positions, then I'd suggest the trader close out 1/2 of the $10,000 short position. This is one reason it is so IMPORTANT for traders to have a trading discipline (much like a business plan) in writing that is a firm guideline for how an account will be managed.

Dow breadth is decidedly weak as the final hour is upon us. Currently I'm showing 29 stocks down for 1 stock, Coca Cola (NYSE:KO) $52.60 +0.38%, showing gains. Dow weakness is lead by technology related shares of Intel (NASDAQ:INTC) $17.99 -6.10% Hewlett Packard (NYSE:HPQ) $14.52 -5.09% while telecom weakness is found in AT&T (NYSE:T) $12.00 -3.15% and SBC Communications (NYSE:SBC) $26.20 -4.3%.

Volume is still rather light this Friday at the NYSE with 884 million shares traded, while volume is brisk at the NASDAQ at 1.25 billion shares.

Breadth at both the NYSE and NASDAQ is still running bearish with decliners outnumbering advancers by a 2 to 1 margin.

Jeff Bailey
Senior Market Technician
Option Investor

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