Option Investor
Market Updates

About face!

Printer friendly version

Stock futures have whipped higher after the September Jobless Rate fell to 5.6%, which was well below the 5.9% consensus. In a separate report , the September Nonfarm Payrolls numbers fell by 43,000, which was weaker than the 11,000 forecast. This "offsetting data" confused traders at first until it was revealed that the August Nonfarm Payrolls number was revised higher to 107K from 39K.

In all, it appears that traders have perhaps been trading under the belief (based on the August Nonfarm data) that the job market was very weak in August, while the revision to the August data shows a stronger-than previously reported labor market.

While the recent weekly jobless claims data for September has been weak, the revisions to the August data actually shows the Jobless Rate falling.

Traders appear to be focusing on the Jobless Rate of 5.6% as S&P futures (sp02z) turned higher and now trade up 4.6 points at 825.10. NASDAQ futures (nd02z) also reversed from their lows and now show a gain of 11 points to 847.50. Dow futures (dj02z) are higher by 57 points at 7,765.

I will make note here that futures have been rather volatile and really depict some "confusions" amongst traders. Expect some volatility as a result of this pre-market action in today's session.

Fair value for the S&P 500 today is $0.60. That price will not change during the session. HL Camp & Company has their computers set for program buying at $1.27 and set for program selling at $-2.04. Fair value for the NASDAQ-100 today is $3.16.

As BEARISH as I am on tech and NASDAQ...

As BEARISH as I am on technology stocks and perhaps the NASDAQ- 100 Index, I do want to express a word of caution. As I write (01:00 AM EST), I do want to make a note as it relates to market history.

According to the StockTrader's Almanac, October is the worst month on NASDAQ.... EXCEPT in midterm election years.

This year, right now, this October, is a mid-term election YEAR.

By the time you read this, you and I will have gotten some economic data this morning.

Due to my current workload, I have not had time to really delve into the historical data, but the last mid-term election year for October was 1998.

In September of 1998 (the last mid-term election year), the NASDAQ Composite Bullish Percent fell to 10% and was "oversold" on a bullish percent basis. By early October, the NASDAQ Bullish Percent had increased to 22%. Then, in early to mid October, the NASDAQ Composite Bullish Percent had turned "bull confirmed" at 30%.

Since September of 1998, the NASDAQ Composite Bullish % has not come close to reaching the 10% level. As of last night, the NASDAQ Composite Bullish % was "bear confirmed" at 25.64%.

Again... I don't know what this morning's economic data looks like or what the market response is, but I want to alert BEARISH traders that are carrying LARGE bearish positions in many NASDAQ stocks to be on the alert for any bullishness.

According to the StockTraders Almanac, there has been only "one lemon" (1978) in 11 midterm Octobers.

For bulls.... this is not an "excuse" to go buying a bunch of call options!!!! Just ask those bulls from 1978 why.

Every "bull" and every "bear" has his or her scenario for why the market will go up or go down. That's great! Just make sure you have some point in mind where the trade/MARKET proves you wrong and you cut out. In trading terms, this is called a stop.

What am I? A bull or a bear?

Some say I'm too bearish, some say I'm too bullish. As of last night, here are the current trades I have open. What am I? Wait... don't answer that! (grin)

Long Agilent (A) Nov $12.50 puts at $1.20 (bearish) Long Campbell Soup (CPB) Nov $22.50 calls at $1.10 (bullish) Long Duke Energy (DUK) Jan $20 puts at $3.50 (bearish) Long Frontier Airlines (FRNT) Nov $10 calls at $0.55 (bullish) Long Johnson&Johnson (JNJ) Jan $55 calls at $4.20 (bullish) Long NASDAQ-100 Trust (QQQ) Oct $21 puts at $0.90 (bearish) Long SunGard Data (SDS) Oct $17.50 puts at $2.35 (bearish) Long 10-year YIELD (TNX.X) Nov 37.50 calls at $2.95 (bearish)

Note: More SPECULATIVE positions are in SDS and FRNT and I would not consider all/any of the above appropriate for every trader.

Each position has a "purpose." Some serve as potential hedges against another. Current "weighting" as it relates to capital exposed is about 50/50 between bullish and bearish positions. As a percentage of total account, current market exposure is about 35% of total account capital. Yes, 65% is cash and looking for a trade (see below).

After more thorough research, I believe I should have chosen the 30-year YIELD (TYX.X) calls, but it wasn't until after I came across a note regarding YIELD curve info, that I discovered I may have purchased a more under performing YIELD call based on current scenarios that may be in play.

So... am I a bull, or am I a bear? Or am I like a warm bowl of Campbell porridge? Not too cold, not too hot, but juuuuuuust right? Time will tell.

One if by land, two if by sea.....

Will FedEx (NYSE:FDX) $52.02 take off if it trades $53?

FedEx Corporation Chart - $1 box

Jim Brown, who I consider to be the "king of puns" sent me an e-mail last night asking.... "Are we about to miss the boat on FDX?" Other than Forest Labs (FRX), Johnson & Johnson (JNJ) and now FDX, have I found too many point and figure charts that have the stock trading ABOVE trend and some decent looking bullish vertical counts.

I like the scenario that the current port lockout that may be costing some company's that normally ship goods via water, might have to turn to alternative means for overseas delivery. The chart of FDX looks to be hinting that other market participants are thinking along the same lines. Looking for bullish entry with a trade at $53.

Bar chartists will also note that FDX is sitting just under downward trend if taken from the March 5, 2002 high of $61 and attached to the June relative highs near $54. Also note the longer-term 200-day SMA at $52.50. If FDX trades $53, that would clear the stock of longer-term resistance trends.

No, No, No... I went with Brown!

I can't remember the tag line for the UPS commercials, but I think it was something like that. Any signs of bullish in this air/ground shipper? Yep!

United Parcel Service (UPS) Chart - $1 box

Hmmmm.... What the heck is UPS doing trading near a 52-week high when many of the market averages are at 52-week lows? An old point and figure charting saying is "the first sell signal in the upper trend is often times a buying opportunity." While I personally don't like to buy the first sell signal in the upper trend, institutions that "know something" will as they take stock from the last of the weak hands before driving the stock higher as their bullish scenario unfolds.

UPS closed at $64.00 +0.96% last night and it would take a trade at $65 to get the point and figure chart back into a column of X.

Johnson & Johnson (NYSE:JNJ) bulls that perhaps took 1/2 position in JNJ before its recent rise that are waiting for a potential pullback to round out to full, might take a 1/2 position in UPS, perhaps spread some "risk" to a different sector with a scenario that hints of bullishness in the "air transportation" sector.

According to Dorsey/Wright and Associates, they classify FDX and UPS as belonging to the "aerospace/airline" group. This group is "bear confirmed" at 22.79%, but here's two stocks in the group that are on "buy signals" and near 52-week highs. It's my guess that Dorsey's "aerospace/airline" sector is being weighed down by a bunch of commercial aircraft stocks that are on sell signals.

I also looked at Airborne Freight (NYSE:ABF) $11.55 +4.61%, but its supply/demand chart is not as bullish as FDX and UPS. As such, I'd look to try and AVOID any potential bearishness in ABF at this time, but if short/put ABF, I might be careful as "something looks to be up" in the air freight stocks.

I the "risk" is acceptable to a bullish trader, I'd look bullish at least 2 calls. The way I'd look to trade the scenario is this. Establish a 2-call position, then if a move gets underway and a 40% gain or more is found in the calls, SELL 1 call and take some gains off the table. The strategy behind this is to try and book some gains EARLY, just in case bullishness is lost if a port worker settlement is achieved. Even if you take an early profit in 1 of the calls and the lockout lingers on, then you've got at least 1 call still remaining that could appreciate if the scenario plays out that the air freight transports are seeing an increase in business.

Jeff Bailey

Intraday Update Archives