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Struggling back

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Stocks have recovered from their lows of the session and currently face intra-day resistance with the Dow Industrials (INDU) 8,474 clawing back near the 8,500 level after a morning low of 8,407, which many deem as critical support in this widely followed and quoted major market average.

The S&P 500 Index (SPX.X) 894 -0.98% has also pared losses from a morning low of 888, and the late morning rally back near 896 comes right near a level where traders witnessed some sell program premium alerts at approximately 10:00 AM EST, which sent the SPX lower from the 894 level to its session low. The SPX may be a more difficult trade near-term as triple-witching expiration on Thursday (indexes) and Friday (stocks) has open interest heavy at the SPX 900 level and may try to gravitate around the 900 level into this week's end.

Speaking of triple-witching, in last night's Index Trader Wrap at OptionInvestor.com, we thought the QQQ might be a short-term traders short ahead of expiration, but thought bears might look to lock in a gain at $25.05 and that $25.05 level has been pegged this morning. Several levels above current trading had been taken out of the money and look to expire worthless and $25.00 was the next largest open interest that option market makers might try and peg to erode as much premium form call holders as possible. The $25 level in the QQQ, would equate to 1,000 for the NASDAQ-100 Index (NDX.X) 1,013 -2.5% and may also be a nice level to close on Friday when the NASDAQ-100 looks to rebalance with a fresh new list of this years winners, as it looks to rid the index of another year's losers.

Shares of oil service provider Halliburton (NYSE:HAL) $20.05 -1.71% had been halted earlier in the session as the stock was spiking higher to $21.50, but has since been released for trading. The company announced it has reached an agreement in principle to achieve a global settlement of asbestos claims. In its announcement, the company said it will pay up to $2.775 billion in cash, 59.5 million HAL shares, and notes with a net present value expected to be less than $100 million for the benefit of present and future asbestos and certain other personal injury claimants. The settlement will be implemented through a pre-packaged Chapter 11 filing of subsidiaries DII Industries, Kellogg Brown & Root, and certain other DII and KBR subsidiaries.

Technology stocks remain under selling pressure with Micron Technology (MU) $10.51 -20.85% falling to a new 52-week low and taking today's top spot among the NYSE's most active list at 22.7 million shares traded. The disappointing earnings news weighs on the sector with the Semiconductor Index (SOX.X) 301.06 -6.10% continuing to lead today's sector loser list and hovering just above psychological support. Look for a trade at 300 to signal further weakness as today's trade at 305 has the $5-box chart breaking below upward trend and triggering a triple-bottom sell signal. According to Dorsey/Wright and Associates semiconductor bullish % (BPSEMI) the sector is "bear alert" at 60.4% and by no means considered "oversold." In late November we issued warnings to sector bulls that the sector was "overbought" above the 70% level and the recent reversal from 74% looks to have been the higher level of risk the MARKET couldn't deal with. Currently, I'm looking for a next level of support on a break at 300 to perhaps firm at 285, but resistance should be formidable at 330- 320.

Crude oil and gold future are on the rebound today with the January Light, Sweet Crude Oil contract (cl03f) $30.58 setting a contract high at $31.25 earlier in the session. February Gold futures (gc03f) $341.00 +0.79% are challenging yesterday's contract high of 343 and traders gold equity traders will monitor a futures break above 343 to bring in some short covering by major banks as discussed in last night's Index Trader comments from industry followers. The Gold/Silver Index (XAU.X) 75.41 +0.99% is recouping some of yesterday's losses and currently holds today's sector gainer list.

Volume remains rather light at both the NYSE and NASDAQ, but up slightly from recent sessions at this time. The NYSE just now trades over 814 million shares, while NASDAQ volume is 943 million.

Breadth is negative as would be expected on a broader move lower with NYSE breadth showing decliners outnumbering advancers by a 2 to 1 margin. NASDAQ breadth is slightly more negative with decliners getting the upper hand on advancers by a 7 to 3 margin.

The big board has 19 stocks trading new 52-week highs versus 41 stocks hitting new 52-week lows, while NASDAQ has 31 stocks achieving new highs versus 51 stocks at new lows.

Key technicals on the bar charts have the Dow, SPX and OEX currently trading just below their intermediate-term 50-day SMA's and a close below this moving average would be viewed as a negative. The broader NASDAQ Composite (COMPX) 1,361 currently trades right on its rounding higher 50-day SMA, while the larger capped NASDAQ-100 Index (NDX.X) 1,012 edges slightly below the 50-day SMA, which resides at 1,016. Only the smaller cap Russell-2000 Index (RUT.X) 385 -1.48% has yet to test its 50-day SMA, which resides at 380, but looks to have downside risk to that level as the larger caps continue to show weakness.

Jeff Bailey

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