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Index Wrap

Back to March's "Max Pain"

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Stocks extended their recent rebound gains in broad fashion, where renewed merger activity and several brokerage upgrades gave lift to large cap names like Caterpillar (NYSE:CAT) $79.48 +2.635 and Citigroup (NYSE:C) $51.32 +2.51%.

Market Snapshot / Internals - 03/29/04 Close

Some slight selling before the close still left the major indices near their highs of the session, with volume levels at both the NYSE and NASDAQ brisk. The Semiconductor Index (SOX.X) 487.57 +1.74% started out hot, but seemed to lose some of its bullish enthusiasm at mid-session, and was the only equity-based index in our WEEKLY Pivot Matrix to not trade its WEEKLY R1.

Pivot Analysis Matrix -

All equity-based indices saw trade at their WEEKLY R1's with the exception of the Semiconductor Index (SOX.X) 487.57 +1.73%. If I were looking for "one sign" in the Pivot Matrix for the current bounce to stall, it would be the SOX's inability to trade its WEEKLY R1, as it was perhaps the sector to really get the NDX/QQQ turning higher last week. While the QQQ did slip back below its WEEKLY R1 by the close, we've been seeing some last-minute weakness like this in recent sessions, which really hasn't been much of a near-term signal for weakness in the following session. If we were to see any short-term profits being taken, then SOX Daily S2 and WEEKLY pivot would most likely be support.

Dow Ind. Components - Sorted by PRICE (03/29/04)

It seemed like it took forever to write this weekend's Ask the Analyst column, but I've highlighted the Title and Symbol of those Dow stocks where we looked at their point and figure charts. Those components' Symbols that are squared in PINK are those components currently showing a point and figure sell signal with their chart.

Intel (INTC) $27.69 +1.13%, which has bounced from an intra-day low of $26.03 last Monday, couldn't quite hold a close above its still trending lower 21-day SMA in today's trade, but has been the biggest percentage gainer among the Dow components the past 5 trading sessions (5-day Net %).

Caterpillar (NYSE:CAT) $79.48 +2.63% got a strong boost in today's trade after broker Baird said it sees significant upside to CAT's current quarter. Baird expects CAT's Q1 EPS to easily exceed current consensus of $0.67 per share, with Baird raising its estimate to $0.86 from $0.71. Baird did issue caution on the stock, noting that the UAW (United Auto Workers) contract deadline is midnight Wednesday, and would hesitate to be a buyer of the stock in front of this event. It may have been the UAW note that kept CAT from trading $80.00, which would have been a reversing higher point and figure buy signal.

Of those stocks currently showing a sell signal on their point and figure charts, CAT has really been the best bullish performer, or leader of those that has shown some technical weakness, while the 5-day and 10-day percentage changes for Intel (INTC) still suggest a stock that may be seeing gains from a near-term oversold condition.

Dow Industrials (INDU) Chart - Daily Interval

In this weekend's Ask the Analyst column we looked at a point and figure chart of the Dow Industrials, where today's trade at 10,350.00 and session high of 10,350.45 was just enough to negate the INDU bearish vertical count of 9,400. We also looked at Caterpillar's (NYSE:CAT) $79.48 +2.63% point and figure chart, which looked very similar to the INDU. If not for Baird's caution regarding Wednesday's deadline for the UAW contract, CAT may have also been able to trade a reversing higher point and figure buy signal.

It would probably be a stretch to say that the Dow's fortunes for further gains hinges on CAT giving a point and figure buy signal, but if looking for some type of demand strength from a Dow component, then CAT is a good stock to monitor, as it is closest to giving a PnF buy signal of those currently having a sell signal associated with its chart.

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

Both the OEX and SPX have come back to close VERY near their March index expiration "Max Pain" levels of 550 and 1,125 respectively. It was the day after their Thursday expiration that buyers just seemed to evaporate, and could have tomorrow's trade being a make-or-break session for the OEX's current bullish momentum. Financials had a strong session with Citigroup (NYSE:C) $51.32 +2.51% (component of BKX.X) trading a new 52-week high after Prudential raised its rating on the stock to "overweight" from "neutral," while Bank of America (NYSE:BAC) $81.04 +1.17% (component of BKX.X and BIX.X) rose back above its 21-day SMA ($80.60) after RBC Capital Markets raised its rating on BAC to "outperform" from "sector perform."

The money-center KBW Banks Index (BKX.X) 100.63 +1.49% did trade and close above its 21-day SMA of 100.41, while the more regional S&P Banks Index (BIX.X) 347.20 +1.15% still finds its 21-day SMA higher at 350, while the Broker/Dealer Index (XBD.X) 700.11 +1.60% is close to challenging its trending lower 21-day SMA at 702.35.

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

All indices except for the Oil Service Index (OSX.X) 100.28 -0.53% and Dow Jones Home Construction Index (DJUSHB) 661.30 -0.16% finished with gains in today's session, and has the SPX right back at its March's "Max Pain" expiration level of 1,125, where the following Friday, it seems as if all buyers had vanished for the spring.

The VIX.X did trade and close back under the 16.78 level today, and I think bears that have been looking for a point to initiate a bearish put position should be looking to do so when volatility is back lower after rising as high as 22.67 last week, when I thought put premiums were outrageous. I would stress partial positions at this point, which can always be added to in the future.

The S&P 500 Bullish % ($BPSPX) saw a net gain of 2 stocks to point and figure buy signals today, but still reads "bear confirmed" status. If looking for first sign of weakness to establish a put trade, I would suggest SPX weakness back below 1,108.

NASDAQ-100 Tracking Stock (QQQ) - Daily Intervals

I thought the QQQ was a good short today, only with the observation that the semiconductors (SOX.X), which has been the sector that lead the QQQ bounce from the recent lows of $34.00. I wanted to be rather protective with a fairly tight stop at $36.10 as a move above that level could bring in some short- covering to $36.43, but where a move back below $35.74 could have some "bounce bulls" pulling the plug after a nice rebound from the recent lows.

Jeff Bailey

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