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Saddam and major indices end up in hole

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The Dow Industrials, S&P 500, S&P 100 jumped to new highs at the opening bell on this weekend's news that Saddam Hussein had been captured by U.S. forces in Iraq, but similar to Saddam himself, stocks finished in a hole, with the tech-heavy NASDAQ-100 Index being the first to tuck tail and run.

I would argue vehemently that Saddam's capture was NOT "factored into the markets." If Saddam's arrest had been factored into the markets, then the Dow Industrials, S&P 500 Index and S&P 100 Index do NOT trade new 52-week highs.

What I do think Saddam's arrest has done is removed one on point of speculation and replaced it with fact. The fact is that Saddam Hussein has now been arrested.

What impact that has on markets is uncertain, but I do think it will have removed one item of SPECULATION, that has kept bears more jittery, and eager to cover.

Take today's trade, and perhaps recent trade in the more volatile NASDAQ-100 Index (NDX.X) 1,396.82 -1.44%, which despite bullish news on the geopolitical front, failed again to make a new 52- week high.

This morning I was rather eager to take profits in a QQQ bullish trade, and when looking to re-establish a bullish trade at what I felt would be the lower end of a daily range, where bulls might well have defended the session, that trade was then stopped out, and certainly has me rethinking that there is much bullish commitment to broader technology at this point.

There was some comment today among market strategists that Saddam Hussein's arrest would have corporations willing to take on more risk with spending and hiring of workers, while this might make sense in coming months, the bullish side of me was certainly disappointed this afternoon when both the NASDAQ-100 Index and its Tracking Stock (AMEX:QQQ) $34.78 -1.3% failed to find daily support back that their monthly pivots. While option expiration "Max Pain" for the QQQ has been calculated as being $34.00 this option expiration, I find today's lack of bullishness and resumption of last week's weakness, a sign that investors and traders may not be overly willing to take on a higher degree of risk at what looks to be a higher range of resistance building at QQQ $36.00.

While the narrower NASDAQ-100 failed to make a new high, the broader NASDAQ Composite (COMPX) 1,918.26 -1.57% was quick to tuck tail and run after coming close to re-testing the 2,000 level with a session high of 1,979.78.

If there was one negative in today's session, it was the market's reaction to Wal-Mart's (NYSE:WMT) $50.74 -3.35% news that its same store stales for December were tracking to the lower end of its previously given 3%-5% range.

Here is a fully corrected (based on final and corrected) tracking of today's hourly price action and internals. I'm not sure what happened today with some of the data vendors, but several checks at various market sites seemed to show constant error and then correction of data. While I make every attempt to check price quotes, there were some errors reported as fact in today's trade.

Market Snapshot / Internals - 12/15/03 Close

There was no improvement in today's A/D line at the 02:00 hour for the NYSE, and while not a good excuse, is one reason intra- day that I thought the NASDAQ-100 Tracking Stock (AMEX:QQQ) $34.78 -1.3% would find a bid back at its WEEKLY Pivot, where a swing trade bull could look for bullish entry, with a stop placed safely below the WEEKLY Pivot. While I do NOT make entry/exit decision solely based on internals, I inaccurately judged what I thought was an intra-day sign that internals at the NYSE were beginning to firm and turn higher, where that leadership or internal strengthening would later be found at the NASDAQ.

Pivot Analysis Matrix

Dow Industrials (INDU) Chart - Daily Intervals

S&P 500 Index (SPX.X) Chart - Daily Intervals

My bar chart on the SPX is missing a couple of bars, and there would not be the gap to 1,062.40 has show, but a break much below the WEEKLY Pivot does have the SPX vulnerable back to its WEEKLY S1 after a sharp jump higher. To be truthful, I didn't expect the SPX to trade its MONTHLY R2, even under the scenario of a Santa Claus rally.

S&P 100 Index (OEX.X) Chart - Daily Intervals

Any other day of the week, and today's trade at a correlative WEEKLY R1 and MONTHLY S2 would probably be considered normal profit taking from a nice bullish move higher. I disagree that Saddam Hussein being captured now provides the catalyst for a selloff. Still, the OEX looks overextended near-term, and pullback to 522 is what I feel should be a strong support level.

NASDAQ-100 Tracking Stock (QQQ) Chart - Daily Interval

It has been quite some time since the QQQ has rallied back above its shorter-term 21-day SMA and intermediate-term 50-day SMA to then turn back below so quickly. While Q's did try and find an intra-day bid at the MONTHLY Pivot of $35.11, when $35.00 bas broken, fell rather quickly below the WEEKLY pivot. While today's trade may be option expiration related with "max pain" at $34.00, QQQ never really could put together what felt like an overly bullish bid after the open.

Jeff Bailey

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