The stage was set last night for a bullish rally after chip giant Intel (NASDAQ:INTC) $25.31 +5.02% said its gross margins might rise in coming quarters, but the news from Intel may have been to "stock specific" as its bullish trade action wasn't enough by itself to have the major indexes holding early gains, as a look of "salsa red" prevailed through the bulk of today's session.
This morning's economic data was inline with economists' forecast, but still showed an economy lacking spice.
I viewed this morning's economic data as not having too much significance on today's trade, but the "one negative" that may have been present, which I didn't think of until 10:23:30 in today's Market Monitor at OptionInvestor.com was a discussion we had here in the Index Trader Wrap last Thursday http://members.OptionInvestor.com/Itrader/marketwrap/iw_071003_1.ASP, which was in regards to a comparison between the then soon to be released Producer Price Index the next day, which did have June PPI +0.5% and core PPI (excluding food/energy) -0.1%. The comparison for any pricing leverage by companies had June CPI rising 0.2% with core CPI unchanged.
In essence, June price increases of 0.5% at the producer level, didn't appear to have much of those price increases (including food/energy components) being passed onto consumers in the form of a CPI rising 0.2%. The core number comparisons, which exclude the more volatile food and energy components may have seen some price gains trickling to the bottom line of corporate income statements in the recent month, but if so, then only due falling producer prices, and not much price leverage by producers over consumers.
Perhaps this type of observation, and Intel's mentioning that its gross margins may see gains, gives some insight as to how pricing leverage by the producer (Intel) can create a more bullish view toward things.
I wouldn't say that the CPI and PPI comparisons were "negative," but they certainly aren't showing an economic backdrop where companies feel they can raise prices for their goods to help grow the bottom line. Not at this point anyway, and cost control at the corporate level and "trimming of fat" still looks to be trend for corporate America.
"Steady yet anemic" is how I'd describe today's economic data.
The Airline Index (XAL.X) 56.27 +2.85% was today's sector winner after AMR Corp. (NYSE:AMR) $11.66 +10.4% said it didn't lose as much money as analysts' thought the parent of American Airlines would lose.
Networkers, as depicted by the Networking Index (NWX.X) 185.25 -3.39% traded weak from the open. I went back to one of the press releases I had read late last night from Intel (INTC) and can only figure that comments from the company that they were still seeing weakness in their communications business, may have been the culprit for a lower trade in networking stocks.
Networking sector weakness was also attributed to Lucent (NYSE:LU) $1.68 -12.50, the once-loved telecom-equipment stock, which in April embarked on a 50% rise by May after its CEO Patricia Russo said the company was on tack to return to profitability by next year. However, lowered guidance given by the company late yesterday may have pushed out that timeframe a little further that the company sees a current quarterly loss of $0.06-$0.08 per share, on revenues of $1.97 billion, which was below initial guidance given that had analysts' estimating a loss of $0.05 per share on revenues of $2.3 billion.
In tonight's extended hours, shares of Dow component International Business Machines (NYSE:IBM) $86.74 +0.34% are falling $2.10 per share (-2.4%) to $84.64 in extended-hours after the company reported inline earnings. Negative trade was found after the company said it had experienced difficulty in its software division in the recent quarter and that its Technology Group will not breakeven in fiscal year 2003. IBM said that pricing conditions have begun to ease on a quarter-to-quarter basis, although conditions are still down on a year-to-year basis.
As we get set to look at the major index charts and today's trade, S&P futures (sp03u) settled at 995.10 and tomorrow's session is underway, lower at 992.50. The NASDAQ-100 Tracking Stock (AMEX:QQQ) $32.16 -0.3% on the session didn't take kindly to the IBM news and trades $31.90 in after-hours trade.
Not quite the "pump and dump" ....
Stock's opened higher, but faded lower rather quickly. I had discussed some "pump and dump" trade possibility on the Intel news, and I will say that the open wasn't as bullish as I thought it might be based on last night's extended hours trade, and the selling on the early reversal lower wasn't a sharp either.
I want to quickly show this morning's market monitor and my thought process for today's bullish profile in the QQQ at $32.12. This screen capture of the market monitor also holds a question from a subscriber regarding my profiled lowering of a stop loss in the SPX/SPY bearish profile from July 1st.
Market Monitor - Just after market open
The lower part of the market monitor was a good question from overnight e-mail that I thought I needed to get taken care of early. As you can see, various traders may have similar view of SPX/SPY as past profile, but different entry points.
Since I had discussed bullish trade in QQQ, but wanted pullback, early action from NWX.X gave hint that I might just get the pullback. Question to myself was... "what level?" While it is "easier" for me to sit and watch a trade develop and profile a "real good" entry point, that's difficult to do and still get traders lined up for a trade.
About 50-minutes after the market opened, the SPX sliced rather quickly below its WEEKLY Pivot, and that action also had the QQQ slicing below the $32.12 level and triggering my bullish profile in the QQQ.
Here's my 10-minute interval chart for the QQQ and what I think bulls need to see in coming sessions per QQQ long at $32.12, stop $31.45, target $33.20.
NASDAQ-100 Tracking Stock (QQQ) - 60-minute intervals
A QQQ bear's conviction was tested early after "good news" from Intel last night. Now a bull's conviction looks to be tested in the morning after IBM's earnings this evening.
You can perhaps see how after-hours trade at $31.90 is fining some support, but "key levels" early, in my opinion are going to be $31.76 support and $32.12 resistance as this is "overlap" from DAILY levels and WEEKLY retracement levels. I've tried to point to the mid-point of regression where I derived my profiled stop of $31.45 and tried to "forecast trend resistance" at upper regression to derive an eventual bullish target of $33.20.
I did think things were looking good for a QQQ bull into the close, now we'll look for the REAL market response when everyone is trading at the 09:30 AM EST mark.
Today's trade saw no net change in the NASDAQ-100 Bullish % ($BPNDX). Still "bull confirmed" at 81% for a second straight session.
S&P 500 Index Chart - 60-minute Interval
The SPX sliced back below its WEEKLY pivot of 998.08, and after seeing a recent high back near 1,013, I think A BEAR THAT IS SHORT/PUT FROM MY BEARISH PROFILE OF 980 is looking to get "squared up" at this point if he/she can on pullback near 985.
A QQQ bull sees his/her QQQ trade is held WEEKLY Pivot, but the SPX traded and closed below WEEKLY pivot.
On one end, a QQQ bull needs or wants to see the SPX rebound and give some lift from below.
On the other end, an SPX bear wants to see the QQQ/NDX give up its WEEKLY pivot and have some leadership strength looking back low at the SPX and INDU, which are weaker.
The trader's question from 1,000 short/put regarded my lowering of a bearish stop to 1,006. If I had profiled a short/put at 1,000, MY profiled stop most likely would not have been 1,006 in last night's wrap. I'm sure there are several traders that have various bearish entries and I'm trying to speak to the trade that I've profiled in the past as it relates to managing that trade as observations have built.
I do hope however that a bearish trader short/long at any point/level in the SPX can perhaps "glean some information" from the Index Wraps, apply it to where they may have a trade placed and create some target/stop levels based on differing entry points.
Bears will be somewhat encouraged by the S&P 500 Bullish % ($BPSPX) slipping back 1.2% at 78.8%, as that is a net loss of 6 stocks to new point and figure sell signals. It would still take a reading of 76% to get this bullish % reversing to "bull correction" status.
The narrower and larger cap S&P 100 Bullish % ($BPOEX) saw no net change today and still holds its bull cycle high reading of 83% for a 3rd-straight session.
Dow Industrials (INDU) Chart - 60-minute intervals
With INTC as a component the Dow couldn't muster a "pump" move higher to our little zone of resistance 9,181-9,188 and quickly reversed back below its WEEKLY pivot. However, somebody was trading that overlapping support and perhaps the upward trend I've shown in "dashed green." I'm going to leave my regression channel in place right now, but it is notable how the Dow and even the SPX and OEX have been violating the lower end of regression in almost equal-point violations. With regression left in place, I'm really looking for this trend to serve resistance, find a rejection back lower to give hint that a broke bullish trend begins to serve resistance and mark a more meaningful reversal of a bullish trend.
There were not net changes in the very narrow Dow Industrials Bullish % ($BPINDU). Still "bull confirmed" at 83.33%.
Pivot Analysis Matrix
My first thinking tonight related to the pivot matrix is focused on the Dow Industrials. Thinking is that it will be "hard" for Intel (INTC) to show a repeat performance and may see some profit taking on IBM news. IBM most likely trades weak at the open, as indicated by after-hours trade. I see DAILY S2 and WEEKLY S1 correlation for support.
This has me identifying OEX DAILY S2 and WEEKLY S1 correlative support, and I've already shows the QQQ DAILY S1/WEEKLY Pivot correlative support.