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Retail sales surge 2.1% in March

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This morning's economic data has given a shot in the arm to stock futures as March retail sales surged 2.1% in March, the largest gain since October 2001's 6.2% and well above economists forecast for a 0.6% gain.

Roughly half of March's gains came from a 5.3% jump in auto sales, which were weak in February. Excluding autos, retail sales rose 1.1%, also beating economists forecast of 0.7% gain.

Other economic data released had the producer price index (PPI) rising 1.5% in March, as finished energy good rose 5.7%. Economists had forecasted a more modest 0.3% rise in the PPI. Food costs edged up 0.1%.

The core PPI, which strips out the more volatile food and energy components rose 0.7%, which was also higher the economists forecast for a 0.0% gain. A Labor Department official said that the core rate would have been flat in March, without the impact from the auto sector.

A quick look at the June Gold futures contract (gc03m) 324 -0.94% shows a loss of $3.00 on this contract and gives some hint that today's higher than forecasted increase in March's PPI isn't overly concerning to market participants.

This action bodes well for broader market equities as Treasuries are seeing a sharp round of selling and most likely is attributed to the jump in retail sales, and not necessarily the PPI data. The 10-year Treasury June futures contract (ty03m) $113'230 -0.56% is down 20/32 as the benchmark bond's YIELD ($TNX.X) jumps to 4.015%. As a near-term benchmark, the 10-year YIELD traded this level on April 7th, when the Dow Industrials traded a range of 8,284-8,520, before closing that day at 8,300.

As noted earlier, stock futures are on the rise with S&P futures (sp03m) gaining 8.3 points to 879.90, NASDAQ futures (nd03m) are higher by 12 points at 1,050 and Dow futures (dj03m) are higher by 76 points at 8,280.

Fair value for the S&P 500 today is $-0.78. That price will not change during the session. HL Camp & Company has their computers set for program buying at $0.66 and set for program selling at $-1.71.

Here's a quick look at the NASDAQ-100 Index Tracking Stock (AMEX:QQQ) $25.77, which currently sees pre-market price action at $26.06. I wrote the following last night. Bulls can be partial position buyers at the open, as the 10-year YIELD should gives near-term upside in the QQQ to approximately $26.42 based on this morning's 10-year YIELD trade.

NASDAQ-100 Tracking Stock (QQQ) - 60-minute intervals

The NASDAQ-100 Index (NDX.X) 1,033.14 and its Tracking Stock (AMEX:QQQ) $25.75 held above an important support level for a second time yesterday (first time was 03/31-04/01 pullback). While I'm writing this part of the morning update on Thursday evening and don't have this morning's retail numbers and initial market response from the bond market, I'm going to "pretend" that the market sees some early selling and what a bull might look for as it relates to the QQQ.

For one, I'd want to see the 10-year YIELD ($TNX.X) hold the above the 3.903% YIELD level of its WEEKLY pivot. Then, since the QQQ and NDX held their zones of support, look for the correlative levels from our pivot matrix in the NDX of DAILY S1, WEEKLY S1 and MONTHLY pivot to have similar level of trade in the QQQ's DAILY S1 $25.46 to find bulls doing some buying as if to show further conviction that today's 09:45 AM EST release of Michigan Consumer Sentiment will show some upside improvement as it would be one of the "first" economic reports to have some data in it that might reflect some improvement among consumers with the progress seen in Iraq.

On the "flip side" of things, a bullish response in the early going, most likely has the QQQ gravitating toward its WEEKLY pivot $26.04, but most likely finds resistance at that point as MARKET participants await the Michigan Sentiment release.

This $26.04 level is going to be some formidable near-term resistance as our DAILY S2 level of $26.08 is nearby, and we can also see how this WEEKLY pivot of $26.04 really has served as somewhat of a "pivot" this week and has been a level of trade support back in March and again on April 4th, just before the prior breakdown to our "zone of support" from $25.22-$25.34.

The "gaps" in the QQQ from $25.65-$26.04 are interesting, and perhaps reflect just how market makers will "remove risk" between session's. While the QQQ isn't necessarily traded through a market maker, the 100 stocks that comprise it and the NASDAQ-100 Index are.

While I've tended to "shy away" from trading the QQQ/NDX in recent sessions because of some earnings warnings in the technology group that have cast a bit of a cloud over the group, I do like the ability of the QQQ/NDX to once again look to hold a key level of support.

With 60-minute interval Stochastics "overbought", while the DAILY Interval chart shows Stochastics now "oversold," I would prefer to trade the QQQ bullish on slight morning weakness near $25.46, then hold onto may hat (stop just below $25.21) and look for a rally build into the WEEKLY Pivot of $26.05 where I'd expect resistance to be found. If the Michigan Sentiment data is "overly positive" or gets that type of response, I'd be hard pressed not to take profit on a QQQ spike near $26.42, but get ready to "reload" back near the WEEKLY pivot under such a scenario.

Jeff Bailey

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