Bulls are stimulated into further, modest technical profit-taking Wednesday with Apple, Greece, Japan and the FOMC minutes weighing in. As of 10:30 ET the SP-500 (SPY) is fighting back to unchanged as bulls try and shake off those influential double top varietals of importance.
On the heels of Tuesday’s “as goes the iShares Bull ETF, so goes the market”, gravity-obliging reversal, bulls found another influential 0.75% worth of pressure in Apple (AAPL) shares out-the-gate to help coerce a bit of profit-taking in the SP-500’s own bearish, higher-high, double top varietal grown off the April highs.
Also in the spotlight early Wednesday and finding favor from investors working that other mischievous sell-side, a meeting between Greece and the Eurozone’s finance minister is being approached cautiously. The debt-riddled country is pleaing its case to secure additional time to push through unpopular austerity measures.
On the officially-sanctioned economic front, minutes from the FOMC will be released later this afternoon. Ahead of next week’s annual economic symposium in Jackson Hole, investors will be eyeing the report for hints of Fed action in-the-works. Also, disappointing export data from Japan saw its largest slump in six months.
A wide miss in Japan's export data showed a decline of 25% in trade with Europe which in turn has reasserted concerns of larger-than-feared global economic headwinds rather than a potential catalyst for monetary action able to successfully stimulate the market into growth.
In those intertwined markets of notice and sometimes influence, the EUR/USD is flat. Despite Wednesday’s headline insistence of investor worry, the bid is looking to validate yesterday’s impressive 0.71% gain to fresh monthly highs within its technical up-channel.
Similarly, the Global X FTSE Greece 20 ETF (GREK) is holding onto minor gains of 0.15% with shares situated in a testing position of a two month congestion pattern and potentially poised for a bullish breakout.
Not performing as well, other Eurozone country ETFs (EWI, EWP and EWG) are under modest pressure with losses of about 0.20% to 1.30%. However, with recent monthly breakouts already in hand, built-up profit-taking rather than graver bearish action appears to be the order of the day.
After staging its leading, massive volume bearish reversal and gaining 17% in less than a month to claim the moniker of “largest market cap ever”, the iShares Bull ETF (AAPL) has nonetheless managed to reverse early weakness to trade higher by 0.55% in Wednesday's first half.
On Apple's option side and with plenty of potential company-specific catalysts regarding new product rollouts lurking and entering into the historically bumpy fall period, a two day spike in premiums to one month highs has remained firm. Intraday, the Sept straddle is trading for 27% IV near $41, while October, which holds Apple’s earnings event, is priced for 28.5% and $60.15 per straddle.
The 20-Yr (TLT) is finding a strong bid of 0.70%. The strength confirms four day of corrective testing into its 200SMA and is likely benefitting from both a mild mental uptick by investors regarding a new program of monetary easing and “safer-haven” positioning on the price chart.
On the corporate confessional side, Williams Sonoma (WSM) is soaring by 10.5% after the company announced a modest top and bottom-line beat, mostly in-line to slightly bullish sales and profit outlook through 2013 and technically, having lagged the broader market since 2011’s established highs.
Separately, luxury homes outfit Toll Bros (TOL) is building up gains of 4.25% and setting fresh five year highs. Wednesday’s support follows its easy $0.19 profit beat, much stronger-than-forecast revenue growth of 40.6%, in-line fiscal year sales forecast and “cautious optimism” expressed by management.
And for the bears, computer and electronics giant Dell (DELL) is shedding 7.2% and testing its summer and 2011 lows for support. Investors are reacting negatively to mixed results which saw a $0.05 profit beat on a slightly weaker sales decline of 7.5% and downside, below-views FY13 EPS guidance of “at least $1.70 per share” compared to Street views of $1.91.
Finally and in those sometimes accurate heat-seeking option markets, the VIX ($VIX) is up narrowly by about 1.25% to 15.25%. On the heels of yesterday’s second half bid which saw the fear of missing out replaced by a slightly more panicked kind of dread, the sentiment gauge remains nicely bid by about 7% over its 10SMA.
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.
