Midday Action: August 14
August 14, 2009
After a flat open and a two-day buying spree, bulls decide to schnitzel a little down to “SP-1000” simply because they can. As of 11:15 the S&P500 (SPY) is off 1.50% and testing a well-worn line in-the-sand on heavier investor footprints.
Some bulls are chalking up Friday’s reckless behavior of profit-taking to a couple economic and corporate reports out this morning. Apparently never out of style, no matter how inconsequential, are headline drivers always required to prod and poke investors into motion?
Not-so-alarmingly, CPI data for July matched expectations with a reading of unchanged, while the core level also had analysts nailing the number with its 0.1% increase. Separately, industrial production data increased by 0.5% and besting views by one-tenth of a percent.
The only ruckus, which typically does a poor job of tape timing beyond the intraday candlesticks, was muted cheers out of Michigan. Sentiment data from the U of M came in below estimates of 69.0 with a reading of 63.2 and did take to the task of extending losses for the Mr. Market.
Elsewhere and more relevant to traders motives, four straight weeks and five months of handsome gains and two days of reinvigorated green shoots hoopla is likely being reconsidered.
Gone or less pressing in Friday’s session are the spun-to-please bullish interpretation of the FOMC, a turncoat bear at Paulson & Co. in select financials (BAC, GS, RF) and GDP data that had bulls saying “Vive la France” and “Danke Schon” to overseas markets.
Pressure in the commodity complex (GLD, OIH, GDX and XLB) and associated picks and shovels appear to be confirming investors less enthusiastic stance. For its part, Black Gold (USO) is getting drilled by nearly 4.0%. The price action has shares of the oil proxy attempting to break its 50-Day MA support, while showing bulls a thing or two about “handling” the market too optimistically.
In sympathy and of notice, NASDAQ component and heavy machinery concern Joy Global (JOYG) is being deconstructed by 5.75% to 40.20. The company was downgraded by boutique shop Buckingham to “Neutral” from “Accumulate.” Industrial miner Freeport McMoran (FCX) is off nearly 5.00% to 62.85 on no spied fresh nuggets or ingots of interest in the breaking news department.
Two-week highs in treasuries are also suggesting investors’ willingness to take profits in equities and possibly move towards a rotation into safer havens. The widely-followed and liquid iShares 20-Year (TLT) is up 0.90 at 93.85.
In sometimes hot-firing option action, one bear is betting a little more than a little something in Qualcomm (QCOM) this morning. As shares fall by 2% and flirt with the 50-Day MA, a block of 18,000 well out-of-money October 36 puts were put up. Priced around $0.25 per contract, the bet represents about $450,000 wagered.
The contract has a bit more than 60 days of play until expiration. But if shares of QCOM cracked by at least 13% and near the 200-Day MA in the next 30 days, the trader would have a double on their hands. In fact, priced at 41% IV, it’s more likely implieds prone to increasing in value under such circumstances would yield even stronger results for the put holder.
Chris Tyler
Senior Staff Writer & Options Strategist
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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.
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