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Off their best, with some bears around

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Stocks are starting to drift off their best levels of the session and for the first time in two days, we've actually see a previous hour's low give way to some downside action. While this is a very short-term observation, it may bring some bears out of a short-term hibernation period and with past "failed" rally attempts may have some aggressive bulls that were lucky enough to pick a bottom taking some gains.

In recent past, the 21-day simple moving averages have been levels of resistance on rallies, and most likely, traders will experience some selling like we've seen in the past hour. However, as we've talked about earlier this morning, there will most likely be some bears that had been a little complacent questioning things and looking for levels where they should have had some protective stops, looking to cover on weakness.

The OptionInvestor.com Swing Trade Model decided to look for a short-term trade to the downside, but we're using a very disciplined stop in the model. We know all to well that it's never fun to be short when a strong short-covering rally is working against you as things tend to get out of control.

Every sector remains in the green as we approach the final 45- minutes of trading with the Semiconductor Index (SOX.X) 243 +7.09% just off its intra-day highs of 250.41, which may have been near a "round number" of psychological resistance. Here too we see the SOX's 21-day simple moving average serving some resistance at 244.00.

While the broader averages show gains today, shareholders of telecom equipment maker Lucent Technology (NYSE:LU) $0.62 -11.42% are questioning a "bull market" as Lucent's shares trade a fresh 52-week low. Earlier today, LU announced further restructuring and more layoffs.

This type of action while "company specific" would still have even the most bullish hair on my head trying to avoid telecom equipment stocks despite any type of belief in a market turnaround. Someday, a telecom service provider will increase their capital expenditure budgets, but only when they start seeing some revenue increases and earnings start filling up the bottom line.

Jeff Bailey

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