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Super Bowl and major indices look sold out

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This weekend's NFL Super Bowl match between the New England Patriots and Carolina Panthers will be played in front of a sold out crowd where demand for tickets has some of the worst seats in the house fetching upwards of $1,750.00 if you want to view one of the most widely watched spectacles in sport.

But when supply of tickets is limited, a sports enthusiast will most likely pay whatever the seller wants, and sellers are said to be few.

The NYSE Composite ($NYA.X) 6,672.04 +0.68%, NASDAQ Composite (COMPX) 2,153.83 +1.41%, Dow Industrials (INDU) 10,702.51 +1.27%, S&P 500 (SPX.X) 1,155.37 +1.21%, S&P 100 (OEX.X) 573.44 +1.42%, Russell-2000 Index ($RUT.X) 601.50 +0.89% and NASDAQ-100 Index (NDX.X) 1,553.66 +1.46% all closed at new 52-week highs.

While today's trade came on the lightest volume levels seen since January 2nd when traders returned from extended holiday vacations, today's new highs after Thursday and Friday's plethora of sell program premium alerts looks to have bulls playing in front of a sold out crowd.

What started out as a defensive battle with the major indices showing mixed results early, turned into a route by the bulls as earnings, mergers, and some bullish interpretations of comments made by Fed Chairman Alan Greenspan giving a lift to the major indices by session's end.

Printer maker Lexmark (NYSE:LXK) $84.50 +7.17% surged to levels not seen in over 3.5 years after quarterly earnings showed the company's printer business seeing pricing power. The news fueled gain in Lexmark's chief rival and Dow component Hewlett Packard (NYSE:HPQ) $26.12 +3.24% to a 28-month high.

Another merger in the banking sector had Sovereign Bancorp (NYSE:SOV) $22.93 -5.16% paying $1.1 billion for Seacoast Financial Services (NASDAQ:SCFS) $34.71 +12.91%, further fueling speculation that consolidation is likely in the financial sector.

Market Snapshot / Internals - 01/26/04 Close

The major indices seemed to begin percolating higher just after 01:00 PM EST. In a speech beamed to a conference in London, Fed Chairman Alan Greenspan made no remarks about the current U.S. economic performance or the Fed's monetary policy, but he repeated many themes he has developed over the years as a strong supporter of capitalism. Mr. Greenspan said, "We can thus be confident that new jobs will displace old ones as they always have, but not without a high degree of pain for those caught in the job-losing segment of America's massive job-turnover process." He added that "the most significant lesson to be learned from recent economic history is arguably the importance of structural flexibility and the resilience to economic shocks that it imparts," Greenspan said. "The more flexible an economy, the greater its ability to self-correct in response to inevitable, often unanticipated, disturbances and thus to contain the size and consequences of cyclical imbalances."

Believe it or not, traders cited those comments on the labor market as bullish comments from the Fed on the labor market, where the interpretation by those that speak "Greenspaneese" saying Mr. Greenspan may have tipped economists to stronger labor data in coming weeks.

Tomorrow, the Federal Open Market Committee begins a 2-day session to discuss the economy and make a decision on interest rates. Many economists believe the Fed will leave its fed funds rate at 1.0%.

Treasuries saw a strong round of selling and reversing last week's gains with the benchmark 10-year YIELD ($TNX.X) rising 7.4 basis points to 4.14%.

Pivot Analysis Matrix -

Another strong showing from the financials in the form of the S&P Banks Index (BIX.X) 354.67 +1.41%, KBW Bank Index (BKX.X) 1,012.86 +1.43% and Broker/Dealer Index (XBD.X) 729.65 +1.29% along with the Insurance Index ($IUX.X) 315.34 +0.78% helped the S&P 500 Index (SPX.X) 1,155.37 +1.21% and S&P 100 Index (OEX.X) 573.44 +1.42% see trade at their respective MONTHLY R2s for the first time this month.

I didn't mark the 1,145 level on the S&P 500 Index (SPX.X) and tomorrow's DAILY S1 of 1,145.79, but this was a level on Thursday and Friday of last week that seemed to find continual sell program premium alerts, where those sell program premium alerts just seemed to weigh on any type of rally and sloooowly pushed the SPX and major indices lower. With the SPX now 10-points above this 1,145 level, any re-test may see strong buying after today's rather impressive gains.

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

While today's volume at the NYSE and NASDAQ was light, today's price action hints that sellers were few, and bears may have been doing the bulk of the buying as they stare at the January and March 2002 relative highs of 1,174. Friday evening I saw that NASDAQ had reported January 15, 2004 short interest data on the S&P Depository Receipts (AMEX:SPY) $115.87 +1.25. While short interest fell to 114 million shares from a record 127 million, average daily volume from 12/15/03-01/15/04 fell to an average daily volume of 30.2 million shares from a heavier 35.9 million shares (11/14/03-12/15/03), which has days to cover rising to 3.78 from 3.54.

While bears will warn that a light volume rally is meaningless and lacks buying, recent history has depicted this price/volume relationship representing few sellers. This can be dangerous for bears when overhead supply of stock is very limited.

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

An intra-day chart of the OEX found resistance at 567.69 (WEEKLY 38.2% retracement) but when the 568 level was trade, the OEX checked 567.69 as support, and like a cat on a hot tin roof jumped quickly to the MONTHLY S2 of 570.30, took a 20-minute breather, then sprinted to close at its session highs.

Bears look to be going into hibernation in not a deep coma, where a break above 575 and WEEKLY R2 has a March 2002 relative high of 595 in play.

Dow Industrials (INDU) Chart - Daily Intervals

IBM (NYSE:IBM) $99.85 +1.99% is flirting with round-number resistance of $100.00, but has a point and figure chart bullish vertical count of $122 currently in play, where a recent triple- top buy signal at $95 has had the stock holding the INDU above the 10,500 level. Procter & Gamble (NYSE:PG) $99.83 +1.99%, the second-most heavily weighted stock in the INDU has been battling with $100.00 the past couple of weeks, but similar to IBM, its point and figure chart shows a bullish vertical count of $121 currently in play. The Dow Industrials (INDU) might just have 11,000 in them by month's end.

The NASDAQ reports that the Dow Diamonds (AMEX:DIA) $107.17 +1.23% short interest grew to a 12-month high of 28.3 million shares short, up from their December 15, 2003 record high of 23.0 million shares short. Higher volume rates from 12/15-01/15 have days to cover falling to 3.98 from 4.18 the month prior. Today's volume in the DIA was 7.091 million shares.

NASDAQ-100 Tracking Stocks (QQQ) - Daily Intervals

After reporting in line quarterly earnings, but providing cautious guidance, shares of programmable logic maker Altera (NASDAQ:ALTR) $24.14 +1.13% trade lower at $23.01 in extended hours, while chip-equipment maker Novellus (NASDAQ:NVLS) $40.25 +0.9% falls near its rising 200-day SMA at $37.20. This has the QQQ trading lower at $38.50.

I've marked the recent 12/15/03 short interest levels of 350 million shares and most recent 01/15/04 short interest of 320.4 million, which shows shorts have been covering.

Late last week, the Q's oscillated either side of the $38.25 level, and this would be the first level to look for what I would consider "tentative" support, with more formidable support at $37.50. A lot of option-related activity I've been noting in the Market Monitor suggests the selling of puts to have strong support at the $37 level.

Jeff Bailey

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