Midday Action: June 23
June 23, 2009
Investors remain technically "grounded" courtesy of fragile psyches, treasury auctions, the Fed and one non-bull carrying airliner. As of 11:05 ET the "SPYder" (SPY) is barely off with a decline of 0.25% but still testing both the mental and technical support of market bulls.
On the heels of a ferocious sell-off worthy of jeopardizing the market's rally and converting many into the bear camp, a few bulls attempted a bit of out-the-gate bargain-hunting in lifting market shares modestly in Tuesday's first half. Quickly grounding those efforts, a crash landing of sorts in shares of Boeing (BA).
Shares of airline manufacturer and Dow component Boeing are keeping more than a few index-weighted portfolios under pressure. This morning the company warned of further delays for its long-awaited Dreamliner 787 test flight due to a "structural fix" of the revolutionary carbon-composite aircraft. On the bright side, at least the problem doesn't require any "green shoots" to be fixed.
Intraday, BA is off 8.50% near 43. Technically, the action, as is the case for many stocks in the past two to three sessions, has shares striking / breaching slightly key support. In this instance, intraday testing of a bullish 50 / 200-Day MA cross, 38% retracement from its March lows and lower Bollinger Band provide a band of potential price support for bulls.
Also inhibiting bulls from getting too frisky, carryover from Monday's worries are likely still playing a part. The World Bank's reduced outlook for developed economies was yesterday's chief catalyst for re-evaluating prior green shoots enthusiasm.
With the commodity complex (GSG, USO, XLB, XOM, FCX, CAT, DE, MOO, SLX) receiving the brunt of the selling pressure and investor scorn, many of those basic staples and associated "picks and shovels" have broken many dearly-held technical lines of interest. Intraday, muted demand from bargain-hunters is being spied but planted green shoots very much absent--and largely a good thing.
Additionally and still on tap, the Fed's closely-watched FOMC strategy message will be delivered Wednesday afternoon. As well, three treasury auctions throwing an additional $104B of paper into the market begins later today with the 2-Year. Traders will be looking to see how strong demand is in order to better establish a "risk appetite" barometer for equities.
Intraday, existing home sales data for May which came in slightly below Street estimates can be taken as a coin toss situation for bulls and bears. Results showed an annualized 4.77M units versus consensus views of 4.82M units. Despite the narrow miss, sales did register their strongest increase since last October and gained 2.4% over the prior month, albeit less than the 3.0% widely expected.
Elsewhere and not helping matters, following Monday's upbeat guidance from semi concern (SMH) Marvell Tech (MRVL), smaller niche chip designer Rambus (RMBS) is weighing in on the group. This morning the company announced weaker than expected sales due to the poor economy and warned for its upcoming quarter.
Management at Rambus reduced its Q2 revenue outlook to a tight range around $27.0M from a prior forecast of $27.0M - $30.0M. The new target falls slightly below Street views of $27.3M. Shares of RMBS are off 14% near 15.35. Technically, the briefly-leading semi name has filled a late stage upside gap which has the earmarks of an Island Top.
Finally, entering the lunchtime nosh and bulls are still nibbling here and there in the likes of the mostly bad beaten down names like those found in the commodity complex. That said, with just fractional gains to show following Monday's near-debilitating price action, bulls are far from gorging themselves on a plentiful menu of similar-looking investment nuggets.
Technically, most indices and individual names are deeply oversold and either in or piercing key support zones. As such, the likelihood for a playable bounce exists and is favored by this market strategist as long as those lines in the sand hold. Ultimately, oversold conditions can beget more of the same when investors attach themselves to a certain type of "sell side" investment philosophy.
Fear as evidenced by the VIX's plus 30% readings is evident too and considered a plus for traders willing to use softer delta spreads to their advantage. Additionally, market prices by and large are far enough removed from the recent highs. Translated, that means a percentage move could trigger without necessarily having to hope for an unlikely replay of the once loved "Green Shoots" market show.
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
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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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