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Off their lows near unchanged

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After a slightly higher open for the major indexes, some follow through selling took the major indexes to their lows of the session, with bond traders also doing some continued "bargain hunting" in higher yields, but this morning's trade is beginning to "settle down" after yesterday afternoon's trade, which saw the major equity indexes give back the bulk of their gains.

The Dow Industrials (INDU) 8,288 is off 12 points with breadth even at 15:15 as a rebound in Altria (NYSE:MO) $29.95 +3.2% offsets weakness in Hewlett Packard (NYSE:HPQ) $15.69 -3.3%.

Sector action is broadly negative with sector weakness found in the Semiconductor Index (SOX.X) 304 -3.5%, Airline (XAL.X) 33.49 -2.3%, Disk Drive (DDX.X) 75.09 -1.45%.

Attributing to semiconductor weakness was an earnings warning out of RM Micro Devices (NASDAQ:RFMD) $5.48 -9.42% when the company said revenues for its March quarter are expected to be approximately $138.3 million, and the loss for the quarter is expected to be between a range of $0.05-$0.07, which was below consensus estimates of $135.1 million and $0.00 respectively. The company said that while it is exceeding its previously given revenues estimate, the company attributs the increase in its expected loss for the quarter primarily to a shift in product mix.

Sectors showing fraction gain this morning has the more regional S&P Banks Index (BIX.X) 273 +0.05% and multi-national to super- regional KBW Bank Index (BKX.X) 745 +0.32% posting gains, while the Gold/Silver Index (XAU.X) 64.12 +0.47%, Drug (DRG.X) and Biotechnology Index (BTK.X) 338 +0.10% edge into positive territory.

Here's a quick look at the SPX and some observations of what took place yesterday as it relates to the WEEKLY pivots and what I'm looking for in the coming sessions.

S&P 500 Index Chart - Daily Interval

Yesterday's trade saw a sharp move higher in the SPX to its WEEKLY R1 level of resistance (895.30), which was somewhat correlative with its MONTHLY R1 of 899.80 and there was undoubtedly some selling of strength from stock bought last week on the pullback of WEEKLY S1. I've been monitoring the 10-year YIELD ($TNX.X), which has started to see some modest selling come in from a "zone of YIELD support" this morning, which has me looking for the SPX to see some firming at its WEEKLY pivot of 869 where we also have an aggressive bullish trend now in place from the mid-March lows. As a "bull" for the equity indexes, I don't expect this aggressive upward trend to hold for years, but it should keep bears from getting to bearish as the SPX makes a new relative high above its March 25th relative high.

In this morning's market monitor, I posted this week's pivot analysis matrix as I was out of the office yesterday. Here is the Pivot Matrix with today's DAILY levels along with the updated WEEKLY levels after the conclusion of Friday's trade.

Pivot Analysis Matrix

In "blue" I've highlighted in the WEEKLY and MONTHLY pivot levels those levels that have been traded for their respective time. Yesterday's action saw all of the WEEKLY R1s traded, with the SPX and OEX seeing their MONTHLY R1s begin traded. While institutions may have been feeding some inventory out at those levels after a build last week on weakness, I would look for any type of YIELD firming above the 10-year YIELD ($TNX.X) of 3.903%, which is this WEEK's pivot, to have institutions looking to once again replenish equity inventories. In my mind, this then has the WEEKLY pivots in the equity indexes looking to be support levels, with any weakness below these levels showing up in the charts like that outlined above in the SPX chart at "zones of support."

Jeff Bailey

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