It has been a rather quiet overnight session, which has seen equity futures rebound modestly from their overnight lows on a plethora of broker upgrades and downgrades.
S&P futures (sp03h) currently trade unchanged at 883.00, while NASDAQ futures (nd03h) hold a 1-point gain at 1,027.50 and Dow futures (dj03h) slip lower by 25 points at 8,300.
Fair value for the S&P 500 today is $0.14. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.22 and set for program selling at $-2.24.
HL Camp is reporting that its program trading monitoring has NASDAQ-100 component Amgen (AMGN) $53.50 weighted on the buy side of computer programs, while recently added NASDAQ-100 component Expeditors International (NASDAQ:EXPD) $30.40 is weighted on the sell side. In the NASDAQ-100, there are 7 stocks weighted on the buy side and 7 weighted on the sell side.
HL Camp says that there are 4 stocks weighted for buying and 11 stocks weighted on the sell side in the S&P 100. 3M (NYSE:MMM) $128.97 is one stock weighted on the buy side, while drug maker Merck (NYSE:MRK) $55.35 is weighted for selling.
Acquisition news has networking giant Cisco Systems (NASDAQ:CSCO) $14.59 lower by 6 cents in pre-market trade after announcing it will acquire privately-held Okena Inc. for approximately $154 million in stock. In connection with the acquisition, Cisco said it expects a one-time charge for purchased in-process research and development expenses, which should not exceed $0.01 per share. Okena's network security software provides threat protection for desktop and server computing systems.
Shares of utility provider American Electric Power (NYSE:AEP) $26.89 are falling 9.7% to $24.51 in pre-market trade after reporting earnings that missed the Street's estimates by 3-cents a share. On Wednesday, shares of AEP had jumped from $26 to $28 in the span of 10-minutes after the company announced a $0.60 quarterly dividend, before slipping back near the $26 level by that session's end. As mentioned earlier this week, a Business Week article mentioned that sever professional shorts were short the stock on the thought that a "cash squeeze" might threaten AEP's dividend yield of 9%. Today, AEP announced it was taking steps to strengthen its balance sheet, including reducing costs and capital expenditures, revising dividend policy, and disposing of non-core assets.
In recent sessions, I've profiled bearish 1/4 to 1/2 bearish positions in the AEP August $25 puts (AEPTI) as the point and figure chart currently shows supply outstripping demand and the stock trades just under its bearish resistance trend after a nice rally from $15.50 in October. A trade at $25 will generate a reversing p/f sell signal and turn the vertical count bearish to $19. The Business Week article mentioned previously has shorts there looking for the stock to trade back near $14.00.
For disclosure purposes. I currently hold a bearish position in AEP.
S&P 100 Index Chart - Daily Interval
In last night's Index Wrap at OptionInvestor.com, we added some observations regarding Microsoft (NASDAQ:MSFT) $52.28 into our index analysis, that gives traders a "key" stock with some meaningful cross-exposure to the Dow Industrials, S&P 500 and NASDAQ-100 Index. After a sell-off in MSFT four-sessions ago after earnings, bullishness has left the major indexes in rather quick fashion.
Yesterday's action had the S&P 100 Bullish % ($BPOEX) reversing lower in a column of "O" to "bull correction" status, as this group of 100 stocks saw a net loss of 2 stocks, or 2%, to reversing point and figure sell signals. It would currently take a reading of 52% to have this indicator fall further, and then into "bear confirmed" status.
For this reason, I'm focusing a bit on support at tomorrow's S2 of 442 and this week's S2 of 444. The reason for this "focus" is that the reversal in the bullish % signals a HIGHER level of CAUTION for bullish traders and therefore, a level of major support for those playing a bounce should be established.
With geopolitical events at play, such as "war with Iraq" traders need to at least plan for some defensive trading into the weekend. At times, a weak trade into the weekend has been seen as some traders and investors look to "get flat" into the weekend. However, after a rather sharp 4-day decline, one might also think that some "risk" from the bullish side has already been reduced and with Microsoft (MSFT) showing 3-sessions of some stability (3-sessions is not a lot, but more that the major indexes have shown), then MSFT may be a "key" stock to monitor near-term, should it attempt to "fill its gap down" from $55.11 to $56.65.
It's my "feeling" that if MSFT is going to attempt to "fill its gap" or just 1/2 of it to the $54 level as discussed in last night's Index Wrap, then it should attempt to do it within 3 or 4 trading sessions.
Microsoft is not only a more heavily weighted stock in the major indexes, but its price action can also influence investor psychology. I can argue this point by simply looking at the last 4 trading sessions.
One thing I'm doing this morning, that you can also do is this. I'm guessing some are "wondering" what next week's levels might be. While we will have to wait until the end of today's trade, I did punch in this week's high, low and used last night's close to get a preliminary "reading" of weekly levels for the S&P 100 Index (OEX). I come up with S2=437.47, S1=444, Pivot= 451.88, R1= 458.49, R2=466.29.
Do any of these preliminary "levels" correlate with anything in the above OEX chart, or even the monthly levels? What about today's pivot analysis levels?
A weekly Pivot of 451.88, say 452 (while preliminary) isn't too far off from this week's pivot of 450, nor today's daily pivot of 449. A preliminary weekly S1 of 444 isn't too far off from the above OEX chart and this week's S2 of 444.
Now.... with the OEX bullish % reversing back into "bull correction" status, I'm now more "bearish" as more stocks are starting to give some reversing point and figure sell signals. Right now, going into next week, I would view next week's range for the OEX being between the new WEEKLY S2 of 437 and R1 of 458.49.
Do you see how "next weeks" S2 moves down a notch to 437, while this week's S2 of 444 looks to be "next weeks" S1?
It may also be a bit unnerving to bulls that "next weeks" preliminary PIVOT level of 451.88, is at current levels of trade.
It is also interesting that my potential "rally point" for the OEX of 457, is just below "next week's" preliminary R1 level of 458.49.
For those "wondering" what this pivot talk and S2, S1, R1 and R2 stuff is, we discussed this topic in last weekend's "Ask the Analyst" column and should hopefully give you an understanding of how these levels are calculated, and how they may be being traded my computers at the institutional level along with retracement brackets.
The above observations probably has a bearish trader willing to hold 1/2 or 1/4 bearish positions into next week and looking for an "add position on rally" back near OEX 457.
With the OEX Bullish % reversing back into "bull correction" status, a bullish trader that has persevered the recent decline, most likely looks to par some risk from his/her account on rallies.
Just remember. The levels from the daily/weekly/monthly pivot analysis matrix is to help traders and investors understand ranges of risk and identify levels where we might expect support and resistance levels to come into play.
The Bollinger Bands that we've shown in the Index Wraps (settings 21-day, 2-Std Dev.) have also been serving as a pretty good range from which to trade.
If you were to ask me how I would focus my attention toward trading right now, I'd say 70% of my focus is to bearish trading, with 30% focused on bullish trading. This might be thought of as 7-points down, 3-points up. Then, 7-points down, 3-points up. Should the bullish % continue to deteriorate, then I begin to turn to a more "neutral" type of trade outlook with 5-points down, 5-points up.