A bold display of pre-holiday financial fireworks sees very modest profit-taking Tuesday. As of 10:50 ET the SP-500 (SPY) is off fractionally by -0.20% as bulls continue to shoulder complacent behavior in an orderly manner.
Its business as unusual after five straight days of upside and gains of 5.61% in the SP-500, the market’s best since 2009. Intraday and back to work after the stateside holiday, bulls are losing a slight bit of well-deserved and none-too-shocking technical traction to a modicum of profit-taking.
Overbought conditions as evidenced by the VIX ($VIX) have dissipated somewhat with the market’s most notorious sentiment indicator up 2.50% to 16.25%. The price action puts the mean-reverting VIX some 11% below its 10SMA after signaling a stretchy and bearish 16% differential on Friday as optimistic bulls collectively discounted the holiday in an effort to collect time decay for the period.
In economic news, European data has followed suite from late last week and offered mostly underwhelming support for higher market prices and similar grudgingly compliant profit-taking barely noticeable in relation to last week’s epic bull.
Across the other pond, some Chinese news agencies are reporting another rate hike as forthcoming. Credit ratings outfit Moody’s has also stated the “scale of problem loans” to local Chinese government’s may prove much larger than current estimates according to a report via the CNBC grapevine.
Stateside, investors have allowed a slight 0.8% factory order miss to be logged in the score-keeping ledger with nary a reaction. Analysts had pegged the May report to reflect a gain of 1.0% following April’s -0.9% decline.
For economic watchdogs, this week’s calendar is largely about Friday’s monthly jobs report and preview nuggets from the Challenger survey on Wednesday and both weekly claims and ADP data on Thursday.
In those markets of sometimes intertwined influence, the natural resource complex is displaying relative strength and strong daily gains as investors put some money to work in last week’s underperformers and recent daily chart laggards.
The iShares Silver Trust (SLV) is up 3.30% near 34 but still wedged within its corrective but undetermined, two month long technical consolidation. The US Oil Fund (USO) is up 2.0% and confirming an engulfing bullish weekly candle off key up-channel support dating back to 2009.
Black gold appears to be benefitting, in part, to a bullish forecast note for 2012 from Barclays. Analysts there were a bit less sanguine about 2011, but are bullish longer-term based on “robust emerging market demand, further reduction in global spare capacity and intensified geopolitics going forward.”
Elsewhere, in a couple other intertwined markets of even greater influence, for a second-straight-session Apple (AAPL) and Google (GOOG) continue to assist market bulls.
The broader market’s light profit-taking has gains of 1.60% and 2.00% in the two muscular large caps to thank for some of Tuesday’s constructive-looking, pause for technical reflection.
Apple’s bid looks to be technical carryover from Friday’s breakout above 50SMA resistance, while Google shares enjoy similar momentum, albeit from a deeper corrective pattern, as well as profiting from an upgrade to “Overweight” from boutique broker Evercore.
Finally and somewhat fitting, a late technical concession from IBD declaring a “market correction” shift to “market uptrend” on Friday has found dearly-held, growth outfit Netflix (NFLX) acting benevolently in breaking out from a five-week long, base-on-base-on-base-on-etc” pattern.
Prompting bulls latest round of enthusiasm is word of the streaming and online media outfit heading to Latin America...via cyberspace, I imagine. With shares up 5.55% at 283, NFLX is about 2% past its “proper but late-stage buy point” and sitting atop the leaders board in the Naz’ 100.
Option bulls in NFLX appear willing to “pay on demand” as evidenced by fresh opening and well-bid call volume in a bevy of its out-of-the money Weekly and regular way, July 285 – 300 strikes. My guess is any would-be naked buyers aren’t paying to watch a title like The Matador.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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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.
