Lighter shopping data means only slighter dropping for market bulls grazing contently in Wednesday’s first half. As of 11:25 ET the SP-500 (SPY) is flat on the session in a marginally late, but better-looking rally attempt, all things considered.
Wednesday’s market action hasn’t exactly been a “so bad, it’s good situation” but after some initial camera-ready agitation and grimacing posing, bulls are holding their own. In the spotlight, weaker-than-forecast retail sales data looks to be morphing from a pooh-poohed woeful miss and building additional support for QE3 or similar monetary action to be secured at the June FOMC meeting.
By the numbers, total sales for May came in with a dip of 0.2% compared to Street estimates calling for a decline of 0.1%. Axing the auto component, sales revealed additional weakness with a drop of 0.4% versus forecasts of 0.0%.
Not helping matters or at least the ability to distribute and promote happy headlines of all is well with the 99%, April data also saw a downward revision of three-tenths of a percent to total sales to -0.2% and -0.3% from 0.1% for the ex-auto tally.
Also on the docket this morning but largely given a pass by investors, producer prices for May fell 1.0% compared to -0.7% estimate, while core levels rose 0.2% and matched Streets views. Separately, business inventories for April grew by 0.4% versus forecasts of 0.2% and following March’s increase of 0.3%.
In those often intertwined markets of influence, across-the-pond the action looks a bit like the calm before the storm in front of this weekend’s Greek government re-vote. Finding modest favor in the face of uncertainty, the EUR/USD is well-bid by 0.77% and the Global X FTSE Greece 20 ETF (GREK) is up about 1.85% and attempting to confirm a weekly hammer bottom.
The VIX ($VIX) is up, somewhat surprisingly, by 6.75% to 23.60%. The bid puts the sentiment index squarely against its 10SMA and in a relatively neutral position short-term, though displaying a modicum of fear historically on an absolute basis.
Shares of the US Oil Fund (USO) are off 0.50%. Wednesday’s relative weakness, but action contained to a second day of tight inside candle activity, follows the latest weekly inventories data which showed a much weaker draw of just 191K barrels versus forecasts of a 1.5M barrel drawdown.
And both hard assets (GLD) and softer but typically more dearly held commodities like the iShares Bull ETF (AAPL) are trading mostly on-par with the broader market and failing to give any prescient info into Wednesday’s second half. Intraday, GLD and AAPL are up narrowly by 0.20% and 0.10% and being contained by their respective 50SMAs.
On the corporate confessional side of things, it’s “Dimon’s Day of Reckoning” according to one headline on MarketWatch this morning, is going smartly for shares of JPMorgan (JPM). The stock is higher by about 2.5% as the company’s CEO Jaime Dimon, an outspoken opponent of tighter banking regulations and industry trading controls, testifies in front of the Senate Banking Committee on the company’s recent and ongoing $2.0B credit derivative miss-step.
Using JP’s embarrassing loss as an example of still obvious risks within the banking industry, Dems’ are expected to push for greater restrictions under the Volcker Rule and Dodd-Frank Act which was executed in the aftermath of the 2008 financial crisis.
Conversely, Republicans are expected to present increased capital reserves as a more agreeable solution to big (handshake) business as usual. Based on that arbiter of shareholder value, it appears the latter is making their case a bit more successfully.
Finally and in those sometimes accurate heat-seeking option markets, bulls in Johnson & Johnson (JNJ) shares are shedding fewer tears, but we’re not so sure about those involved in some heavier-than-normal option activity. JNJ is up about 1.60% after the company received regulatory clearance for its Synthes acquisition late Tuesday; which prompted a couple analysts to upgrade shares in tow.
Compared to its 50SMA of about 20,000 contracts, more than 120,000 calls and puts have traded today with puts favored by a margin of 1.3-to-1.0. The most notable activity looks to be the shoring up of positions in the slightly out-the-money June 65 call which expire Friday and undetermined July 65 call activity which could reflect rolling, as well as fresh opening and closing of positions given much larger open interest.
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.
