Option Investor
Market Updates

Futures show gains ahead of option expiration

Printer friendly version

Stock futures are posting gains ahead of what many expect to be a volatile session as stock index futures, stock index options, stock option and now single stock futures expire.

S&P futures (sp03h) are adding 8.3 points to 893.10, NASDAQ futures (nd03h) are higher by 7.5 points at 1,020 and Dow futures (dj03h) are higher by 70 points at 8,425.

Fair value for the S&P 500 today is $0.06. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.26 and set for program selling at $-2.56. Fair value for the NASDAQ-100 today is $4.00.

Fed Chairman Alan Greenspan weighed in a speech late yesterday and said he's cautiously optimistic that the U.S. economy will resume robust growth, but he gave no timetable for the recovery. He thought consumer spending is likely to slow as the stimulants of rate cuts wear off, but businesses should be ready to step in with increased spending as soon as the threat of war subsides.

Fresh economic data won't impact the markets today. The U.S. economy expanded at a 4 percent clip in the third quarter, the government reported this morning in its final Q3 gross domestic product numbers.

Snapshot of NASDAQ-100 Changes

On Monday morning, the NASDAQ-100 Index (NDX.X) 1,006.05 and the NASDAQ-100 Tracking Stock (AMEX:QQQ) $25.06 will get a face lift as it's "out with the losers and in with the winners" as 15 stocks make their headline appearance in the NASDAQ-100.

I've put together a quick snapshot view of the stocks going out and in, along with their associated sectors, weather they trade above or below their point and figure chart's trend, if the stock's p/f chart shows the stock on a buy or sell signal (for bullish % reasons) and at what level it would currently take a trade for the stock to reverse its current buy/sell signal on the chart.

NASDAQ-100 Index Changes

Some quick observations and perhaps the most OBVIOUS is every stock headed out the door trades BELOW its p/f chart trend. I'd characterize 11 of the outgoing as "technology" versus 1 coming in as "technology." This may have the QQQ and NASDAQ-100 being a little less volatile. I say this now, and will want to monitor for this and perhaps factor that in to the type of options trader I've been in the QQQ or NASDAQ-100.

A couple of stocks that I've highlighted in RED on the going out side of things are stocks that look vulnerable to the downside. Things too look for near-term is a large volume spike, followed by consolidation and a breakdown from consolidation.

Sepracor (SEPR) $9.14 +15.69% on Thursday is a stock that looks interesting and perhaps bullish on a break above $11.00, which would be a spread-triple-top buy signal and a level SEPR hasn't traded since breaking a triple-bottom at $11.00, plummeting to its 52-week low of $4.00 in mid-September. Preferably, I'd like to see the stock stick right in here until the end of the year, let all the tax-loss sellers finish their selling, but watch list it for a bounce in January. Under current market conditions, and the bullish % charts reversing lower, caution would be advised and only partial positions suggested.

PMC (NASDAQ:PMCS) $5.22 -6.28% is a stock that not only looks like its on the way out of the NASDAQ-100, but aggressive bull's portfolios that have seen the stock exceed its bullish vertical count of $8.75 by about $0.25 when it traded $9.00. A reversing sell signal $4.50 would trigger a bearish signal reversed and if supply turns, could drive the stock back to its lows. Hey... if Micron (MU) can do it, then PMCS can too.

Andrx Group (NASDAQ:ADRX) $14.16 -3.93% has been trading sideways for the better part of a month and looks to be breaking down from a massive wedge formation on the daily bar charts. The recent trade at $16.00 hints of a trap that may have sucked in some speculative bulls and a break lower at $13.50 on volume could see the stock unravel to the downside.

Don't just watch the weak going out, but also those going in. Shares of Lamar (NASDAQ:LAMR) $34.20 +1.33% may have bid yesterday ahead of their NASDAQ-100 entry. However, a LARGE pennant formation is forming on the daily bar chart and a rounding lower 200-day SMA served resistance in late October near $37. What I'm going to monitor for in coming session is a BIG volume spike from NASDAQ-100 entry, but a break below the rounding higher 50-day SMA ($33.30) could signal a test of the lows. If the "fundamental" institutions question the fundamentals and dish it out to the NASDAQ-100, a break lower on volume could be signal that the fundamentalists are pawning another "winner" off on the NDX. The point and figure chart is bullish, but the group (media) saw its sector reverse into "bull correction" status, similar to what we saw the other day in the S&P 500 Bullish % ($BPSPX).

Let's try and "look back" at what happened with ADRX. There's some things mentioned above we can look for to see "what was," but I'm willing to bet that some things you've read in commentary recently may strike familliar, and drive home some things that you've read in commentary across the site. Several traders have been having success on an intra-day trading basis with some of John Seckingers "pivot" commentary. Wow! I see a "Seckinger Pivot" on ADRX back in February. PIVOT defined. Painful If Violation Of Trend?

Andrx Group - Daily Chart

ADRX was added to the NASDAQ-100 in October of last year. We mustn't assume that just because a stock is added or subtracted from an index that it should rise or fall. I can't say for certain that the more fundamental investment shops sold ADRX to the NASDAQ-100, but despite the supposed increase in demand an addition to an index is supposed to bring a stock, it didn't seem to help ADRX that much.

About three months later, technicals really started to break down and the bar chart along with the point and figure chart started flashing signs of trouble. Breaks below the longer-term 200-day SMA, spread-triple-bottom sell signals. John Seckinger likes to look for breaks from "pivots" where a stock's price (based on supply/demand) becomes very efficient, but when the break from that efficient pivot takes place, powerful moves can be found.

Jeff Bailey

Intraday Update Archives