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EARLY TRADE

An auction marketplace filled with buyers in some venues has been countered by some fresh economic concerns and the more plausible profit-taking from a hopeful and overbought condition. As of 11:00 ET, the S&P500 ($SPX) and NASDAQ Composite ($COMPQ) are each off by -.27% on heavier and mad money schnitzeling off the latest top.

Spearheaded by the NASDAQ, the ‘tech wreck’ tried to deliver a second-straight day of the proverbial “All Aboard!” signal. Better-than-expected results from the likes of online auctioneering behemoth eBay (EBAY), handset provider Nokia (NOK), telecom giant Qualcomm (QCOM) and unofficially AT & T (T) had investors attempting to prepare for the best of times out-the-gate this morning. With a deluge of decent overall reports offered in other sectors as well, those aspirations were mostly confirmed. Names such as Dow Chemical (DOW), Occidental (OXY), Bristol Myers (BMY), Legg Mason (LM), Union Pacific (UNP) and Cardinal Health (CAH) fell into that grouping.

Unfortunately for bulls sensing the easy ride, 2007, despite its headline gains, has issued further below-the-surface games instead. For headline readers, some finger pointing laying blame for the lack of a bullish extension in Thursday’s session has been the minority of corporate releases that came in below expectations. Names on that front include Ford (F), BJ Services (BJS), Lear (LEA) and Bemis (BMS). Ironically enough (not really), from that rather small grouping the stock action is very mixed. That being the case, it seems that disappointing guidance on a whole, despite the BTE’s for Q4 numbers and very real opportunities for profit-taking on the table are responsible for what’s currently being served to investors.

Homebuilders Beazer (BZH) and Ryland (RYL), as well as a somewhat disappointing report on existing home sales are also weighing in on the broader market. Beazer missed Wall Street estimates by 10 cents and guided its 2007 EPS below consensus forecasts. Ryland Homes fared a bit better in delivering better-than-expected earnings of 1.98. However, in-line range guidance of $3.75 – 4.22 that fell below mean estimates of $4.22 and lower gross margins certainly didn’t help bulls that pushed the stock to eight month highs by Wednesday’s trade. Neither did today’s release on existing home sales. That report saw a bullish decline in inventories and median prices holding steady. As such, both factors do suggest further stabilization for housing. However, with sales at the same time unexpectedly dropping and dipping slightly below estimates (6.22M vs 6.30M est.), the reality hasn’t supported bulls already hanging from the rafters, with a base still being built. For their part, BZH is off 2.25 at 44.77 and RYL is down 1.65 at 54.32.

GROWTH & MOVERS COVERAGE

EARNINGS CALENDAR

Select reports scheduled after the market close and in the premarket:

REPORT CALENDAR

Economic releases scheduled for tomorrow:

INDICES & MARKET MOOD

There have been a few disappointments on the day of both the corporate and economic variety, as well as the ‘spin it how we see fit’ category. Today’s higher than expected weekly claims (325K vs 310K) could easily fall into that group, as Wall Street dances back and forth between a tight labor market and the world is falling apart variety. More to the point, a somewhat mad upside dash into a few unchartered technical territories for a few major averages, a sub 10 reading of complacency in the VIX, 1^st Quarter guidance that’s realistically not cutting it and a  non supportive energy complex (XLE, OIH) in Thursday’s trade, all come to mind as equally, if not better, reasons to remember all your ‘options’ while they’re available and less popular.

Thursday’s rather quick out-the-gate schnitzel and current lunchtime grilling of bull couldn’t have been anticipated with 100% accuracy. That is of course, unless traders are using the HS 20/20 system, which I’d love a real-time version of. As written about in the latest HOT SHOTS though and expressed during Wednesday’s run up, managing profitable and open longs certainly made cents. That is, if variables like risk-to-reward and those pesky, but worth paying attention too, secondary technical factors make the case for traders, away from more popular versions of what’s moving the market today.

Chris Tyler
Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.

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