Bulls resume their buying spree after a stretch of window shopping on stronger-than-forecast retail sales and a bit of “just right” economic data from across-the-pond. As of 11:45 ET the SP-500 (SPY) is up 0.35% and hitting fresh relative highs and not-to-be-forgotten zone resistance, given some slightly more "vixing" sentiment readings.
Following four inside days of window shopping by bulls and bears, varied but likely “stimulating” GDP reports and an economic survey out of Europe set up Tuesday’s bid in the SP-500, while pleasant-looking July retail sales data established the icing on the cake for investors with growing (risk) appetites.
By the numbers, Europe’s linchpin Germany topped GDP forecasts of 0.2% growth with a figure of 0.3%. Number two France faired a bit worse with its flat reading but also beat views calling for a 0.1% contraction. Meanwhile, but not too mean for stimulus-craving bulls, the broader Eurozone fell by 0.2% but matched analyst forecasts.
Also in the mix and helping traders hold onto the brass, not gold (GLD) ring of monetary stimulus, Germany’s ZEW sentiment survey slid unexpectedly in August for a fourth straight month from -19.6 to -25.5. The drop compared to a flat median estimate as polled financial market experts expect the German economy to cool further during the next six months.
Stateside, bulls showing some premarket spine were further stimulated by a surprisingly strong retail sales report rather than fresh, convinced prospects of monetary action from the Fed. For July, total sales jumped by 0.8% versus estimates of 0.2%. Axing the auto component and sales also grew by 0.8% and easily beat the Street’s 0.3% forecast. In cahoots with Europe’s data, bulls appear to be having their cake and eating it too on Tuesday.
In those intertwined markets of influence, the EUR/USD is pulling back 0.15% after carving out a higher high in early trade and further confirming Monday’s up-channel signal off a test of 50% support. Country EFTs (EWP, EWI, GREK and EWG) are up fractionally and continuing to build on tight daily chart consolidations.
The iShares Bull ETF (AAPL) is up 0.65%. Follow-through on top of Monday’s increased, but below-average volume breakout from a handle within a corrective cup-shaped base has AAPL less than 2% from its all-time-highs. Fellow Naz’ and SP-500 constituent Google (GOOG) is one-upping Apple twice over with its outsized gainer of 1.20% and a much stronger “turnover” of shares. For a second straight session volume is running above-average while confirming Monday’s technical handle breakout established within a seven-month corrective “W” or high-level double bottom pattern.
On the corporate confessional side, retailers have begun reporting with generally well-received deliveries the theme of the day. Finding investors wallets, shares of Dow constituent Home Depot (HD) are up 4%. The building supplies chain topped profit views by $0.03 on earnings of $1.01, announced slightly below-views sales growth of 1.7% but built up investors’ piece of the American Dream by issuing above-views FY13 EPS guidance of $2.95 versus the Street’s $2.93.
TJX (TJX) and Estee Lauder (EL) are up 1.5% and 10% after each outfit took its turn announcing narrow profit and sales beats and cutting their respective outlooks slightly below estimates. Current growth up-and-comer and recent IPO Michael Kors (KORS) didn’t follow suite and it’s definitely showing, much to the delight of bulls. Shares of KORS are up 15% within a five month corrective base and about 4% from its all-time-highs following a flashy profit beat of $0.20, revenue trumping growth of 70.7% and upside, above-views guidance.
Elsewhere on the confessional front, Groupon (GRPN) is issuing its latest discount package for bulls. The online group coupon specialist announced a penny beat of $0.04 per share. However, a revenue shortfall and below views guidance has sent shares tumbling lower by about 27% to 5.50 and about 85% from its November highs of $31. Option traders spied collectively pricing in an expected move of 27% with the front month’s roughly 300% IV on Monday are; to say the least, on the edge of their less-confident 1SD seats.
Finally and in those sometimes accurate heat-seeking option markets, the CBOE Volatility Index ($VIX) is, less surprising than otherwise, finding a bid Tuesday with the sentiment gauge up about 6% at 14.50%. On the heels of Monday’s remarkably confident behavior which turned outright complacent by day’s end with a 15%, 10SMA spread and test of the March and multi-year lows of 13.66%; bulls are pushing their luck a bit less with slightly more attention paid to--and paying for, very cheap protection.
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.
