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THE BOTTOM LINE -
The apparently contradictory market preoccupations are: 1.) A rebounding economy WITH (finally) new job creation - bullish - versus 2.) The anticipated Fed interest rate hike because of #1 - bearish.

This particular conflicting viewpoint has gone on in every economic recovery in the last 50 years and is not contradictory exactly - rather, this is the market shifting gears so to speak. Eventually the Market always follows the economy and earnings - the money - earnings trump everything, eventually.

The Indices all had the minor early week rebound that I was looking for - and, these rallies then reversed and all the indices fell to new lows for the current decline. My sense of how things might unfold was that the recent or first rally would not "work" and that a final bottom would come later on.

I can also continue to say the same thing about the S&P and Dow indices - they are not yet registering a fully "oversold" condition. The Nasdaq is getting somewhat oversold however - but not yet on longer-term weekly charts. The Composite might fall under its prior lows in the 1900 area even, if the Russell 2000 Index provides a "bellwether" indication - more on this follows in my comments on the Composite.

FRIDAY'S TRADING ACTIVITY -

The BIG story was that 288,000 new jobs were created - and unemployment fell to 5.6% as estimated by the Labor Department as released Friday. Both numbers were above expectation. Moreover, March's non farm payroll gains got revised higher from 308,000 to 337,000.

The S&P 500 (SPX) was off 1.4% on the day and closed under 1100, at 1,098.69. The Dow 30(INDU)lost 124 points (1.2%) on its close at 10,117. The Nasdaq Composite (COMP) fell some 20 points (1%) to close at 1,918.

Given the outlook now for a rate hike, interest sensitive sectors like financials and the home builders took a beating. Also factoring into negative sentiment was crude oil's run above $40 per barrel. Ouch!! - those fill up runs with my high performance German car are getting painful to the pocketbook. Time to look at something more fuel efficient as everyone is buying SUV's still - I always did like to buck the trend.

Technology stocks showed some strength with bellwethers Cisco, Dell, and Intel, up on the day, bucking the trend. The SOX Index (Philadelphia Semiconductor index) was up 1 percent. I can't say that the chart looks at all bullish however.

OTHER MARKETS -
I mentioned already that Crude oil broke through $40 per barrel on Friday, but did not also note that this was a 13-year high. Yipes! I would say that this is also an underlying worry related to the economic recovery.

Treasury yields closed Friday at their highest level since last July as the bond market closed off for the seventh straight week after the employment report. The 10-year note closed down a point and 1/4 at 94 1/32 to yield 4.77% versus 4.6% on Thursday.

The dollar rose against the euro, to close at $1.1978 and back below 1.20 - the greenback was up 1.4% against the Yen, at 111.30 yen on the New York Forex market close.

Gold continues to look weak technically and was off 2.6% - at $378.40 an ounce on the New York Merc. Gold continues to retreat from the 400 area which seems to be a benchmark resistance level - but so was $40 a barrel in Crude Oil!

MY INDEX OUTLOOKS -

S&P 500 Index (SPX) - Daily chart:

It looks like the S&P 500 could re-test the prior low in the 1087 area, or even get down to about 1080. I would be a buyer of the SPX calls if 1080 was seen, looking for a rebound to maybe 1120 where I see resistance currently. Needless to say, its getting close to getting out of puts.

Well, traders are getting so bearish, that it's bullish! Makes perfect sense in the Alice In Wonderland world in the street of dreams. That is to say that when my Call to Put ratio gets down to the area of the green line once or twice, a rebound is usually not far off - typically, coming within 1-5 trading sessions.

S&P 100 Index (OEX) - Daily chart:

I said last time that "its also quite possible that the prior lows around 532-534 get re-tested...." To add to this, I would note that this is also the area of its 200-day moving average as you can see on the left hand daily chart of the S&P 100 (OEX).

532 is the prior low - 531 is where my lower trading envelope line comes - if OEX gets here don't expect it to go much lower, without some kind of rally. If OEX gets to 531-532, then rebounds, its sets up a potential double bottom, a pretty bullish pattern if it holds as a low. Of course if prices fall under a prior low and don't rebound to back above this low within 1-2 sessions, it's showing a very weak market.

I peg resistance now at 550.

Dow Industrials (INDU) Daily:

I can't get too bearish on the Dow with it at the lower end of its hourly downtrend channel, as can be seen with DJX right hand chart. The very key 200-day moving average intersects in the Industrials at 10,000. A weekly close under this level, would set up potential lower targets to 9800.

In the Dow Index (DJX), resistance is at 102.5, then around 103.5 and finally, at the top end of the current downtrend channel in the 104 area. The Dow 30 Index (INDU) had a very weak technical close at the end of this past week and the Dow had been holding up the best. The market is spooked - per usual - by the Fed. It was always an analogy that the Fed gets the party going and then takes away the punchbowl!

Nasdaq Composite (COMP) and Russell 2000 Indexes - Daily:

The 1900 area is key support in the Nasdaq Composite (COMP) and this index is oversold on the daily charts. Traders should be, will be, on the outlook for signs of support in this area, if reached. Especially so, with the bellwether Semiconductor Index (SOX) having a bit of a rebound on Friday.

Resistance is at 1980, then 2000 - I would look at buying Nasdaq related Index puts in this area.

Suggesting that 1900 or the prior lows might not hold in the Composite is the action in the bellwether Russell Index (RUT), which took out its prior lows and suggests that another down leg may be underway in Nasdaq.

My recent Trader's Corner article on Bellwether indexes and stocks can be found here. Nasdaq 100 (NDX) Index - Daily:

1400 has been my target on the Nasdaq 100 (NDX), thinking that NDX might get a rebound back up to 1450 at key resistance.

Now however, I'm beginning to wonder if 1400 will hold - 1368 is the prior low and this may be the next target given the tendency for the indices to re-test prior key lows (or highs). If NDX does get into this area, and holds, its sets up a potential double bottom and would offer a compelling indication to get into calls at that point - that (the pattern) and the fast approaching oversold reading on oscillator type indicators like the RSI - see chart below.

Nasdaq 100 tracking Stock (AMEX:QQQ)- Hourly:

Buying QQQ under 35 is what I suggested. Still do, but how much under? The 34.50 area, at the lower end of the hourly downtrend channel looks a possible target and potential support early in the coming week. If the Q's take out that prior low at 34.80, the stock would likely dip a bit further. Then there is the prior low at 34 and the question of whether this low will get re-tested. 34 is a definite technical target or lower target possibility.

I have some degree of confidence in looking to buy the stock in the 34.5-34 area, if reached - using a sell stop at 33.7 to exit. In that case my objective is back up to 35.50-35.70. The ability to hold above 35.70 would be bullish and suggest that prices could regain 36.

Good Trading Success!

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