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Industrials gain while tech trades flat

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The "dividend trade" may be partially in play today as the Dow Industrials (INDU) 9,264 +0.93 trade at their best levels of the session and sport an 85-point gain, while the tech-heavy NASDAQ- 100 Index (NDX.X) 1,226.67 +0.06% has been either side of unchanged, but look to try and follow the Dow in a morning recovery from yesterday's declines.

Dow breadth is decidedly positive this Triple Witching Friday, which some consider to now be Quadruple Witching with single stock futures thrown into the mix. Of the 30 Dow components, 26 show gains, with 4 trading in the red (BA -0.02%, DD -0.4%, INTC -0.56%, HD -0.57%). General Motors (NYSE:GM) $39.05 +2.5% lead gains after the company said it plans to bolster its balance sheet with new debt offerings and Prudential upgraded the stock.

General Electric (NYSE:GE) $30.20 +1.13% reaffirmed guidance at its quarterly Analyst Meeting this morning saying it is comfortable with Q2 (June) EPS guidance of $0.37-$0.39 (consensus $0.38) and sees full year 2003 EPS of $1.55-$1.70, which is also inline with consensus. Share of GE fell yesterday after Merrill Lynch lowered its full year estimates to $1.59-$1.61 and thought GE might narrow full-year guidance to the low end of the previous range of $1.55-$1.70. Today's trade hints some bears may have taken action on Merrill's thoughts and remove the trade after GE stuck with prior range. Not a bad short-term trade thought, but GE's test of a rising 21-day SMA yesterday and slight rebound today from this shorter-term trend most likely has shorts keeping a loss small and monitoring GE for any weakness back below yesterday's lows of $29.81.

Financials are seeing a bounce from yesterday's losses and helping the S&P 500 Index (SPX.X) 1,001.86 +0.71% reclaim the 1,000 level, with the narrower S&P 100 Index (OEX.X) 505.87 +0.81% currently gaining 4 points in this morning's trade.

In this morning's market monitor I made comment about an intra- day reverse head and shoulder pattern presenting itself in the S&P Banks Index (BIX.X) 309.11 +0.89% and if neckline were broken to the upside at 308.50 might lend to further upside in the group to and have the SPX bidding back to the 1,005 level. While more of an observation for short-term traders, morning action does seem to have helped get the SPX back above 1,000 as we approach the lunchtime hour.

The Dow Jones Home Construction Index (DJUSHB) 451.56 -3.05% is today's sector loser. This despite earnings from KB Home (NYSE:KBH) $66.34 -5.21% that had the company reporting Q2 (May) earnings of $1.94 per share, which handily beat estimates by $0.30. The company also raised fiscal 2003 EPS guidance to $8.20, which is above consensus of $8.09 per share.

Today's trade certainly looks to be that of profit taking at this point after a euphoric run in the group the last 10 weeks.

In last night's Index Wrap we looked at the NASDAQ-100 Bullish % ($BPNDX) which had reversed back lower to "bull correction" status. I was quickly looking through the various sector bullish % from Dorsey/Wright and Associates and noticed that the Biotechnology sector bullish % (BPBIOM) reversed back lower into "bear alert" status with yesterday's trade. I'll try and run some stock screens for potential put/short candidates, and I don't need to think too much about a potential bearish trade in Human Genome Sciences (NASDAQ:HGSI) $12.87 +3.79% on rally back near $14.00.

Jeff Bailey

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