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Off their highs, but holding gains

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After a strong opening trade the major indexes are off their highs, but holding the bulk of their morning gains with the Dow Industrials (INDU) 7,646 +1.25% holding a 94-point gain, but off its highs of 7,689, which was well above our DAILY R2 level of resistance. Something the Dow or the major indexes haven't been able to do in recent weeks.

The Dow's gains are being seen with good breadth at this hour with 27 of the 30 components trading to the plus side, with United Technologies (NYSE:UTX) 55.65 +2.77%, DuPont (NYSE:DD) $36.36 +2.68% and Caterpillar (NYSE:CAT) $45.32 +2.48% leading the gains, and more than offsetting Hewlett Packard (NYSE:HPQ) $14.60 -6.29% weakness.

Shares of Hewlett Packard (HPQ) have come under selling pressure after Merrill Lynch said that their review of HPQ's recently filed 10-Q indicates that the company has overstated cash flow from operations by $144 million in its February 25th earnings release, and while Merrill believes this was an honest mistake and found no indication of manipulation, they say the timing of this error comes at an unfortunate time when investors are already jittery over segment accounting changes, where certain units are accounted for differently.

Shares of DuPont (DD) are benefiting from a Banc of America upgrade to "buy" from "neutral" based on its view that DD's top- line is showing gradual improvement, and thinks that any easing in oil prices will create a favorable bottom-line valuation. Banc of America issued a price target of $42.

The broader S&P 500 Index (SPX.X) 814.50 +1.29% jumped to a morning high of 818.81 on broad sector bullishness, and came within 2-points of testing its WEEKLY pivot of 420.6, after yesterday's low test of WEEKLY S2 at 789.70. Sector gainers attributing to today's continued rebound, which took hold yesterday afternoon has the Semiconductor Index (SOX.X) 295.95 +2.95% back within shouting distance of 300, while the S&P Insurance Index (IUX.X) 216.04 +2.92% looks to rebound from its recent drubbing, which was spurred on by negative comments from Warren Buffet earlier in the week regarding reinsurers.

The more tech-heavy NASDAQ-100 Index (NDX.X) 990.57 +2.06% rose to a session high of 993.13, which was enough for this index to trade its WEEKLY pivot of 991.50, and marks the first index to trade its WEEKLY pivot of the major indexes we follow in the pivot matrix.

Also testing its weekly Pivot and holding it is the 10-year YIELD ($TNX.X) 3.685% which is on the rise due to selling in the benchmark bond. As it relates to our pivot matrix, this is a near-term bullish move for equities that may have traders looking at cash finding its way into equities.

In this morning's market monitor, I've discussed the measuring of relative strength between the 10-year bond's price, which today is falling, against the major indexes, specifically the Dow, where at some point in the future, we would look for a relative strength "buy signal" to confirm a more lasting and meaningful shift from bonds toward stocks would be underway. I will discuss this technique in a later intra-day update, as one day's trade won't be enough at this point to signal a more lasting and meaningful shift. However, the pivot matrix levels do give hint today, as perhaps they did in Tuesday evening's Index Trader Wrap, that a rebound in equities may have some "legs" over the next couple of sessions.

Jeff Bailey

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