Key resistance and a more definitive expiration find bulls and bears considering their next options on this third Friday of August. As of 12:20 ET the SP-500 (SPY) is narrowly higher as bulls crack their heads against channel and double top technical resistance.
From across-the-ponds, following Thursday’s well-received, stimulating monetary policy teaser by Chinese Premier Wen, bulls are finding a bit less reason to applaud additional tied-at-the-hip trader gossip of certain action from the country’s policymakers, as well as German Chancellor Merkel’s, “heard it before” and pledge-stealing line of “doing whatever it takes” to save the Euro.
Likewise and on the officially-sanctioned economic front, tamer producer prices for Germany have failed to stimulate bulls into action. July prices rose by just 0.4% and less than half of forecasts calling for a 0.9% year on year increase. Theoretically at least, today's lower price pressure allows for a bit more ammunition for policymakers to actually do whatever it takes regarding further stimulus measures.
Stateside and also failing to set the bull into motion, a pair of better-than-forecast reports on consumer sentiment and leading indicators have come and gone with nary even a 5-minute candlestick of importance. A preliminary reading on sentiment from the U of M came in at 73.6. The reading improved upon July’s 72.3 and rather flat estimates of 72.2. Separately, leading indicators doubled forecasts of 0.2% in rising by 0.4% for July and reversing June’s dip of 0.3%.
In those intertwined markets of influence, the EUR/USD is proving somewhat of a technical menace to bulls. The currency pair is off 0.23% and reversing early upside follow-through above Thursday’s bullish engulfing candle and 50SMA resistance as an up-channel versus a bear flag continues to develop.
After more than three weeks of backing and filling from record highs, the 20-Yr (TLT) is attempting to reverse off a corrective test of its 200SMA. Shares of TLT are up 0.80% in a daily chart harami pattern. Reduced trader optimism regarding QE3 and “risk on” appetite for equities have been primary drivers behind the 9% decline from highs set on July 25.
Speaking of appetites, Apple (AAPL) is to the bulls liking Friday. Shares of AAPL are up by 1.30% and narrowly above its April all-time-highs of 644. A potential lower-high, double top from earlier this week has been voided, though other similar temptations such as the higher-high variation are in-play currently.
And the VIX ($VIX) is off 6% at session and fresh intermediate lows of 13.5% and confidently below its 10SMA by about 9%. The “Fear of Missing Out” gauge is finding assistance from investors looking to squeeze out some time decay over the weekend, where currently, the only assumed risk is the “risk off” variety by sidelined investors and / or bears.
On the corporate confessional side, Ann (ANN) shares are no longer the wall flower variety. The retailer’s stock is being flung off the discount rack to fresh five-year highs and up 21% on the session. The outfit put up all-around decent results in beating profit views by $0.12, slightly stronger-than-expected sales growth of 6.6% and issuing a very modest upside FY13 sales forecast of $2.39B versus the Street’s $2.37B and prior views of $2.37B.
Finally and in those sometimes accurate heat-seeking option markets, Russell 2000 constituent Live Nation Entertainment (LYV) has unveiled a possible large bear in the spotlight. On a day obscured by the expiration of the August contract, the typically lightly-traded and meager audience of residing open interest in LYV is welcoming on board an opening position of out-of-the-money 20,000 contracts in the October 7.5 put.
With shares at 8.82 and flat, the $0.20 ticket price for entry appears to have been purchased based on the bid / ask spread of $0.10 / $0.25 and the trader potentially eyeing a bearish breakdown from a near four-month long symmetrical triangle. In order to breakeven by expiration, a long put holder will need LYV to drop 17% in the next 63 calendar days.
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.
