Bulls find a bit of technical stimulus from a flirtatious China and sweet “something’s” from Cisco. As of 9:30 ET the SP-500 (SPY) is up 0.50% and breaking out to fresh highs in fearful trade resistant to missing out, but the kind sporting one fresh arrow in the bulls' quiver.
Chinese Premier Wen Jiabao is playing a game of chicken with bears Thursday. The latest installment of rumors, innuendos and some action in-between is the country’s central bank still has room for additional monetary easing due to cooling inflation. Stimulus flirtations increased in their promiscuity after the top official offered bulls the message of “We have the conditions and capabilities, and will be sure to fulfill this year’s economic and social development targets.”
Stateside, Cisco (CSCO) is also stimulating a few bulls into action with shares up 8.65% and filling last quarter’s bearish earnings gap. The networking giant narrowly topped both its top and bottom-line views, failed to dangle the carrot of increased business spending, but delivered a little something with a 75% quarterly dividend hike to $0.14 while extolling the virtues of its financial strength and flexibility and return +50% of its free cash flow through payouts and buyback programs.
In sympathy, shares of F5 Networks (FFIV) are up 4.5%, Juniper Networks is tacking on 2.5% and Riverbed (RVBD) is up 3.75%. And shares of NetApp (NTAP) are currently up 4.0% near session highs in volatile trade which has established a roughly 8% roundtrip booking for bulls. The outfit announced, now, more well-appreciated results of a four cent profit beat, just shy of estimates sales of $1.45B representing a year-over-year dip of -0.9% and in-line Q2 earnings and revenue guidance.
On the economic front, US weekly claims came in a happily a tad below views at 366K versus 368K but narrowly above the prior period’s 364K. Housing starts for July missed forecasts of 763K with a figure of 746K. However, permits which measure builders future intentions proved promising as the stat jumped to 812K compared to flat forecasts of 770K.
Across-the-pond, European bourses did a little of this and a little of that overnight and in the wee hours following strong UK retail sales data and varied, but in-line CPI reports within the Eurozone. Currently, country ETFs (EWG, EWI, EWP and GREK) are performing a bit more sympathetically to further bulls’ “risk on” cause.
In those other intertwined markets of influence, the EUR/USD is up handily by 0.60% and suggesting weakness of the past two sessions may have been a technical head-fake for bears. A lower high pivot followed by yesterday’s downside follow-through and near break of support ultimately held the recent channel lows. Net, net the price action allows Thursday’s “risk on” bulls a safer technical haven for positional speculations.
Conversely, the 20-Yr. (TLT) is following through on this week’s bearish downside momentum and hitting fresh three month lows with a decline of 0.65% nearing its 200SMA. Weakened trader optimism regarding imminent stimulus action from the Fed, but nonetheless, an increasingly voracious appetite for equities, are conspiring to make for a less safe haven for fixed assets these days.
The iShares Bull ETF (AAPL) is up 0.65% and in-tune with the broader market. Today’s bid is attempting to technically nullify a bear flag and larger, lower-high double top if Tuesday’s pivot highs are traded through.
And the VIX ($VIX) is off a narrow 1.35% but still near 14.6% for a second straight session. The action is just removed from a test of its March and multi-year lows of 13.66%, which from a contrarian standpoint and coupled with Monday’s fearfully complacent 10SMA differential, isn’t a good sign for market bulls.
On the other hand, after seven to eight days of narrow consolidation work in the SP-500, the time allowance has also secured a neutralized test of the 10SMA today at session highs in the VIX. As much, the bulls do have a modicum more of support in challenging key zone resistance, but one which continues to make a good deal more sense and cents with the use of cheap premium and protective option strategies.
Finally and in those sometimes accurate heat-seeking option markets, Facebook option volume is soaring to more than 350,000 and double its daily average. Thursday’s primary driver are the 271.0 million shares now available on the open market after being locked up and the other estimated 1.0 billion on its way through years-end as FB stock hits fresh lows and trades down 5.5%.
Put activity is leading by a 1.65-to-1.0; but that kind of favor is fairly common, "writing on the wall", sort of fare. That bias probably makes more sense when traders take a moment to realize it takes two sides to consummate a trade.
On the one hand, Facebook has not exactly lived up to its initial billing during its short life as a publicly-traded company and has likely attracted its share of detractors prone to buying puts. But on the other, we’d estimate the world’s largest social networking venture still maintains plenty of bullish option trading advocates looking at “targeted purchases” using the sale of puts and bull put spreads and married puts as well—and in turn, equally responsible for the bearish, but illusory readings.
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