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A confident market of late finds a slight bit of profit-taking off the latest officially-sanctioned pulse on the economy. As of 11:10 ET, the “SPYder” (SPY) and “Cubes” (QQQQ) are fractionally mixed around the “unched” mark on lighter and constructive volume totals.

For early birds and bulls, a global tail wagging the dog trick, a trickle effect of positive sentiment and a couple of bullish corporate surprises were enough to prop up futures modestly out-the-gate. Intraday though and outside of individual story stocks, conditions though have become slightly less enthusiastic on the heels of two weak-sounding economic readings easily appreciated as vehicles for portfolio trimming following strong back-to-back gainers for the broader market.

For the bulls not willing to give it back just yet, shares of Yahoo (YHOO) are up .90 at 28.42 following a raise at Citigroup to “Buy” from “Hold”, while simultaneously bumping up its price target to $34. Analysts cited a 6% discount to Microsoft’s (MSFT) current two-tiered offer, 11% below the initial $31 price tag and 23% below a possible $34 bid. Additionally, Oppenheimer chimed in this morning by saying that after recent talks with management, it sees Microsoft in position to raise its bid.

“Aggie” giant Monsanto (MON) is also helping bulls continue their merry ways. After lagging the broader market of late, shares have surged by more than 9.50 points to 114 following a raise in the company’s FY08 profit outlook to a range of $3.15 - $3.25 and above current Street views of $2.87. Sector peers Mosaic (MOS), Agrium (AGU), Syngenta (SYT) and Potash (POT) are amongst the similarly-positioned finding sympathy bids in Tuesday’s first half.

For bulls looking to add a little restraint to the portfolio, the S & P / Case Shiller Home Price Index is one catalyst to ponder. The reading came in for all intents and purposes in-line with analyst estimates. However, the 10.7% year-over-year decliner has found its share of promotion from bears eager to point out factoids such as the largest recorded drop and 19 out of 20 metropolitan areas showing price reductions. With the housing sector (XHB) having been one of the market’s leading technical areas of strength over the past week, a convenient reason for attempting to reignite worry has been delivered. The XHB is off .10 at 22.85.

Separately, still waning levels of consumer confidence, as well as current and future expectations came in below February’s levels were used by traders to score a quick downside, but not-too-steep test of psychological and technical supports. Today’s report saw headline consumer confidence drop to 64.5 representing a miss of nine points, while falling below last month’s 75.0 reading and notching its worst levels in five years. Similarly, a dismal-sounding expectations index fell ten points to 47.9, while the present situation index slumped nearly fifteen points from 104 to 89.2.

Elsewhere for the bears or those looking to schnitzel recent gains, some bankers are becoming financial anchors once more. BofA (BAC) is off 1.50 at 40.95 after Merrill cut shares to “Sell” from “Neutral” and lowering its profit estimates. At the same time, Merrill (MER) is also finding some profit-taking on the heels of JP Morgan slicing its estimates from $5.00 per share to $2.75 and well-below consensus FY08 views of $3.57. Shares are off .80 at 47.58.

Separately and also a drag, but not a financial anchor per se, internet behemoth Google (GOOG) is bearing lower by about 7 points near 453.75. UBS reduced its FY08 & 09 profit estimates and its target price by 20 points to $570. Analysts there cite “nothing structurally wrong,” but are concerned Google will see a slowdown in “paid clicks,” along with potential integration difficulties in its acquisition of DoubleClick.

Three days into the market’s nascent “confirmed rally” and bulls really couldn’t ask for better conditions technically. Into the lunchtime hour and fractional infractions of justice are now blinking ever-so-slightly green, but still dictated by profit-taking status. Ideally, the technical hemming and hawing will continue for one to two days in “going nowhere” fashion or perhaps test some nerves with an actual price test of daily supports such as a 38% to 50% retracement from last Monday’s lows. There are no guarantees of either of course, but there’s nothing wrong with preparing for an ideal situation amongst other options always possible in the market.  


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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