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Midday Action: November 2


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Chris Tyler, Optionetics.com
November 2, 2009


An oversold platform, decent news allowed to inspire and a bit of slight dollar relief find bulls snapping up bargains to kick off the month of November. As of 11:00 ET the SP-500 (SPY) is up 1.10% after a very tricky October.

"Have you driven a bull lately?" This Monday morning, a few investors have taken some cash and put it down on last week's market clunker. Part of the test ride comes from surprise profits out of auto giant Ford (F). The company managed to dazzle with an unexpected profit beat of $0.26 per share versus estimates calling for a loss of -$0.12.

Ford also surprised Wall & Main with its stronger-than-expected sales of $30.9B which trumped views by $2.49B and the company seeing record growth in China during its third quarter on a revenue increase of 63%. Intraday, F is up 9.00% at 7.63.

In other confessionals, growth traders are still steering in reverse in China-based Wonder Auto Tech (WATG). Shares are skidding lower by 4.50% to 12.35 but off session lows of 11.77 which thus far, has found optimistic use of the 50-SMA as technical support. The action appears to be a case of expectations still being too high despite the generally strong report.

Wonder Auto posted an in-line profit of $0.24 per share, saw its revenues jump by 50% from the year ago period and found management boosting guidance. Hmm, maybe they need to trick out their ride with one of those once popular yield signs which states, "Bull on Board?"


Also headlining the technically "ripe for the picking" market which saw implieds in the CBOE Volatility Index or "VIX" explode higher by about 25% and above the historically feared 30% level; a trio of economic nuggets have enjoyed some game winning relief pitch style appreciation amongst bulls.

A few short trading hours or days prior and reactions to good data may very well have compelled a "Sell the news" response. Alas, following last week's 4.50% market drop, an expansion and month-over-month beat of 55.7 for the ISM, a surprisingly strong 0.8% jump in construction spending and a 6.1% increase for pending home sales data widely-expected to draw a flat reading have been a bit easier to cheer after last week's dramatic episodes of "Must See TV" from CNBC.

Finally, bulls appear to be resting easier Monday as the US Dollar (UUP) remains under slight pressure. With UUP off 0.62% at 22.56, the unwinding of the once popular carry trade has eased with the price charts now showing a fifth day of mostly consolidation type action off year-to-date lows.

In that sometimes accurate heat-seeking option action, some bulls in Human Genome (HGSI) are happy and others most likely aren't. With implied volatility getting crushed from about 250% down into the 70s for the ATM contract and a bid in shares following positive stage 2 results with regards to its lupus "BLISS-76" collaboration with GlaxoSmithKline (GSK); softer delta bulls are the big winners on the session.

A critiqued November 20 / 25 bull call spread discussed by JP Morgan and given the thumbs up by this strategist on Friday at Investors.com, due to some discussed pricing prowess, is up 70% thereabouts to $3.75 versus its purchase risk of $2.20 per spread. Intraday, HGSI is up 6.50 points at 25.25 and the results finding favor with Wall Street as a trio of brokers upgrade shares and Leerink Swann estimating fair value at $40 per share.

Finally, heading through the lunchtime nosh and the market's eager beavers, umm bulls have retreated a bit, but prices do remain well bid with the SPY up 0.88%. At the same time and typically a good sign, the VIX is mostly hanging onto levels associated with panic on the streets of Wall & Broad as it trades near 29.25%.

As discussed in the Weekly Outlook however, the view is chasing the bull isn't likely worth the effort just yet, despite the fast 6.00% corrective move, stiff VIX readings and a stretch differential signal of more than 15% above the 10-SMA. Instead, I'd rather look at the weekly view and appreciate a market that's come a long ways from those March lows and still looks awfully disconnected from an economy clunking its way forward at a much slower pace.

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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