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Response is bullish

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The major indexes have moved to their best levels of the session in what looks to be a bullish response to today's 02:00 PM EST release of the Fed Beige Book. I haven't even been able to look at the report and I can't for the life of me think that traders have the speed-reading capabilities to have read all it contains, but the market response has been positive since its release.

I do think that most traders haven't even looked at the report, but bears appear jittery. I've seen a BIG volume spike in the NASDAQ-100 Tracking Stock (AMEX:QQQ) $30.43 +0.86% when the Q's moved just above this morning's high of $30.36, which to me at least hints that jittery bears were going to "run for cover" should the Q's break that level and move much above the Q's WEEKLY Pivot.

NASDAQ-100 Tracking Stock (QQQ) - Daily Interval

Here's a 10-minute chart of the QQQ, which I think does a pretty good job of showing the increase in volume that came not on the release of the Beige Book Report, but on the break to a new session high. Yes, it took buying to get there, but the rather notable "spike" in volume is what I interpret as short-covering in the Q's, and perhaps additional momentum buying from bulls.

I'm also keeping an eye on the Biotechnology Index (BTK.X) 480.31 +2.9%. Here's a "technology sector" that really has NO tie to the Beige Book. The BTK.X actually traded a bit lower from its session highs on the Beige Book release, and this had me "wondering" if the bulls were going to sell into strength. However, we've now seen the BTK.X start to move to an intra-day high, and to me, this does give some hint that there's also some momentum bulls still willing to get aggressive from the buy side in a sector that I would think isn't overly "economically sensitive."

One sector that is VERY economically sensitive is the homebuilders. The Dow Jones Home Construction Index (DJUSHB) 471.54 +6.09% has surged to a new all-time high and leads sector winners. Today's trade most likely still has sector bears looking for a "bubble to burst" in the sector.

Today's move looks very bullish and will get a good test tomorrow with a plethora of economic data. I do think bulls can play the move higher, but would look to use the "inside day" technique to keep risk at a minimum. I'm looking to do this with my bullish profiled trade in the QQQ from $30.12, with an initial stop just under today's low.

Jeff Bailey

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