Bulls say “Domo arigato” to Japan’s central bank but fail to find their technical mojo. As of 11:35 ET the SP-500 (SPY) is up a modest 0.20% as a prior program of asset purchases continues to be digested for a third session.
Overnight and following in Bullnanke & Co.’s footsteps, the Bank of Japan announced fresh stimulus measures wherein policymakers will increase the size of the country’s existing asset purchase program to JPY80.0 trillion in an effort to boost its frail economy.
Elsewhere and maybe keeping bulls preoccupied with the business of neutralizing last week’s overbought gains in the broader markets, an unnamed Chinese official suggested China could use economic leverage against Japan in the latest chapter of this week’s territory dispute.
Stateside, housing data this morning is mixed and possibly keeping a lid on market prices technically. Existing home sales spiked by 8% in August to 4.82M, easily topping forecasts of 4.55M and marking its strongest annualized rate in more than two years.
Separately, housing starts missed estimates of 768K with an actual figure of 750K, but still indicative of a recovery according to economists. At the same time, permits which measure builders’ future intentions rose narrowly above views of 800K with an increase of 803K. Intraday, the SPDR S&P Homebuilders ETF (XHB) is up 1.5% and confirming a short, two-day pullback.
In those intertwined markets of influence, all is relatively quiet on the western front but looking a bit more technically pleasing. The EUR/USD has reversed early weakness to trade up 0.18%. Wednesday’s bid is forming a bullish hammer after finding support from the 10SMA within a never-that-simple pullback formation. Eurozone ETFs (GREK, EWP, EWI and EWG) are mostly following suit with consolidation gains of about 0.15% to 0.85% and also showing constructive qualities on the daily chart.
The US Oil Fund (USO) is being technically drilled for the second time this week. Following Monday’s unconfirmed strategic reserve tapping fallout, shares are off 2.50% after gapping lower and breaking below 50SMA support intraday. Today’s price driver is surprise word from Saudi Arabia, the world’s largest oil exporter, that the country will take action to keep prices stable. In turn, traders are busy pricing in an anticipating a loose turn of the spigot and increased supplies coming to market.
The iShares Bull ETF (AAPL) is off 0.25% and sitting precariously pretty near $700 after a nice market-leading run to all-time-highs earlier this morning. The modest relative weakness comes despite Goldman Sachs reaffirming its 25 million iPhone sales forecast and the IHS’ estimated 56% growth in 2012 for the tablet market.
The 20-Yr (TLT) is up 0.35% and breaking above its 200SMA and resulting in some likely short-covering. And the VIX ($VIX) is off 2.5% near 13.85%. The somewhat surprising pressure puts the Fear Gauge roughly 8% below its 10SMA and in position to close at its lowest levels since its August and five year lows were established back on August 17.
On the corporate confessional side, restaurant operator Cracker Barrel (CBRL) is up 7.5% to yummy all-time-highs after topping top and bottom-line forecasts and issuing in-line FY13 sales and profit guidance. Separately, AutoZone (AZO) is zooming higher by 4.25% following mixed results showing a profit beat of $0.06 on slightly weaker-than-expected sales growth of 4.6% and a build in the retailer’s inventories to 6.6%.
Shares of Questcor (QCOR) are off 38% after insurer Aetna (AET) refused coverage of the drug manufacturer’s Acthar gel stating its efficacy beyond West Syndrome wasn’t proven to be effective for other conditions. Following the clinical policy bulletin, short-seller outfit Citron Research chimed in with its latest “pooh-poohing” of Questcor’s business prospects.
And in those sometimes accurate heat-seeking option markets, Tuesday saw some very heavy opening put activity in Questcor’s out-of-the-money September 47 put, at-the-money October 50 and well out-of-the-money October 40 put. The front month activity appears to be naked bets placed on the name, while similar volume of around 8,000 and much lower open interest in October suggest a large vertical was put up.
In examining the put action what we still can’t determine is if front-running or a running over of the bull was involved. That’s largely due to Oppenheimer reiterating its “Outperform” on shares and raising its price target to $69 yesterday. As much, “targeted purchases” which have nothing to do with buying puts for protection or bearish speculations, may have been behind the unusual activity--and a financial bomb for Oppenheimer’s followers.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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