A dithering doji chooses to dabble around 1400 a bit more on Thursday following mixed economic data. As of 11:55 ET the SP-500 (SPY) is off narrowly by 0.20% and continuing to test the perseverance of both bulls and bears.
Favorably “stimulating” economic data out of China spearheaded by weakening retail sales, slowing industrial production growth of 9.2% versus the prior year-over-year print of 9.8% and benign consumer inflation of 1.8% have failed to lift the SP-500 after a tepid intraday attempt at securing fresh highs within key resistance of 1400 – 1422.
Keeping the bull contained, the Bank of Japan’s decision to keep rates unchanged and failure to announce any fresh stimulus measures as its core machinery data missed views with an increase of 5.6% versus 11.1% estimate may be one point of discontent for investors.
Likely not helping matters, varied trade balance data produced an upside surprise for Italy while promoting a more bearish grimace for the U.K. And a pair of sundry U.S. reports saw improved and better-than-forecast weekly unemployment filings of just 361,000 versus estimates of 375,000 but a surprise 0.2% drop in wholesale inventories compared to forecasts of a 0.3% increase.
In those intertwined markets of influence, the “risk on” program has gone from “pause” to “risk-off” in the EUR/USD. The troubled currency pair is down 0.80%, breaking below four-day consolidation support and the key 1.232 level on the weekly chart. Country ETFs (EWG, , EWI and EWP) are displaying a modicum of sympathy with modest losses of 0.75% to 1.70% sans the Global X FTSE Greece 20 ETF (GREK) which is seeing a bid of 1.5%.
Stateside, the VIX ($VIX) continues to flirt with its YTD and multi-year lows near 15%. As noted Wednesday, conditions remain fragile for bulls until the sentiment gauge’s 10SMA differential has more opportunity to neutralize towards 0.0% from Friday’s stretchy reading of 14% and a current relationship of about 10%.
On the corporate confessional side, investors shopped Kohl’s (KSS) mixed to slightly weak earnings report, but have since opted for the exits with shares off 1.5% compared to early gains of about 2.0%. By the numbers, the department store operator announced a four cent profit beat, mostly in-line sales decline of 1.0%, neutral-bracketing Q3 EPS guidance and a modestly below views outlook for its fiscal year earnings.
In passing and for the bulls, shares of Century Link (CTL), Continental Resources (CLR), Brinker (EAT) and Canadian Natural Resources (CNQ) are enjoying relative strength gains ranging from about 1.50% to 6.0% following their respective earnings releases.
Finally and in those sometimes accurate heat-seeking option markets, the iShares Bull ETF (AAPL) is making a few traders positioning to “capture the dividend” on Wednesday using deep call verticals, happy campers today. Apple shares are flat, but not really after going ex-dividend this morning as the company declared its first quarterly dividend since 1995; and at $2.65 per share, a doozy but one which apparently caught a few existing deep in-the-money call holders, asleep at the wheel.
For those lucky enough to escape assignment (which lesser but still existing open interest shows occurred) after exercising their long calls on some very heavily traded deep verticals; the newly adjusted buy-writes / synthetic short puts would have been sold for the dividend of $2.65 per spread.
With the bulk of the verticals in Apple traded on strikes where the real put market ranged from pennies to about $1.50; those are some tasty gains of about $1.10 to as much as $2.60 and easily captured today.
A trader “gifted” a buy-write courtesy of a long call holder unwilling to exercise and Lady Luck (in escaping the O.C.C.’s lottery assignment process), can now buy a real put to lock in the conversion or a higher strike put to secure a synthetic bear put spread for a credit. For more information regarding the mechanics, this morning’s Strategy Snapshot features Apple’s dividend play.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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