It's enough to have a trader wanting to pull his hair out as the markets showed yet another gapping session open and some consolidation. Yesterday it was a gap lower and a slow progression lower with the Dow Industrials (INDU) finishing the session down 213 points, while today it's a gap higher and the Dow trading up 204 points currently.
Key technicals currently in play have the Dow Industrials (INDU) 8,241 +2.5% trading just below its intermediate-term 50-day SMA of 8,276 after trading as high as 8,318 near the opening tick. The broader S&P 500 Index (SPX.X) 877.23 +2% also traded right near its 50-day SMA of 877.26 and it may be the closing levels, which dictates market action into Friday's option expiration.
Last night I had a conversation with fellow analyst John Seckinger regarding a trading technique he has discussed in the Trader's Corner called "Open to Close" and this morning's action hints of a broader market edging lower into today's close.
With the Dow Industrials (INDU) and S&P 500 (SPX.X) both trading right near their 50-day SMAs, it may be a good observation that tonight's close dictates market action into tomorrow's option expiration.
After jumping higher to open at $72.80, shares of IBM (NYSE:IBM) $71.66 +10.53% traded a session high of $73.00, but are edging back marginally. Today's gap higher has "Big Blue" back above its 50-day SMA of $69.52.
Shares of Cisco Systems (NASDAQ:CSCO) $10.50 +7.03% lead the market's most active list with volume of 54 million shares traded. Yesterday I profiled the Cisco November $10 puts, looking for a decline into earnings. I still like this trade as CSCO finds some resistance at its short-term 21-day SMA of $10.60, with target near $9.00. No stop on profiled options. For disclosure purposes, I currently hold a bearish position in CSCO, which was established yesterday in the November $10 puts.
Shares of Intel (NASDAQ:INTC) $10.49 +7% are the second most actively traded stock at 44 million shares. Most likely we're seeing short covering here on the heels of IBM's earnings.
Sectors action is positive with Fiber Optic (FOP.X) 29.38 +7.3%, Disk Drive (DDX.X) 52.64 +7.7% and Airline (XAL.X) 33.44% +6.7% leading gains, while Gold/Silver (XAU.X) 60.09 -1.66% shows a modest loss.
Retailers as depicted by the S&P Retail Index (RLX.X) 287 +0.13% trade near unchanged levels after disappointing earnings from Sears (NYSE:S) $24.41 -28%. Sector bellwether and Dow components Wal-Mart (NYSE:WMT) $56.45 -0.54% trades marginally lower in sympathy after a gap higher at $57.50.
Market breadth is positive at both the NYSE and NASDAQ with advancer outnumbering decliners by a 3 to 1 margin at both exchanges.
New highs versus new lows category improves today with 28 stocks trading new 52-week highs versus 44 stocks at new lows on the NYSE, while NASDAQ shows 29 stocks at new highs versus a diminishing 36 stocks hitting new lows.