Market Wiggles Up on a Mixed Day

Pre-market futures are up, especially tech stocks which are getting a boost from the HPQ earnings just as I speculated yesterday. However, oil is up over $115 and and several Financial stocks had their earnings estimates cut. Interestingly, Goldman Sachs is at the center of both news bites as they are the ones cutting estimates on other Financial companies, and they are reiterating their $149 per barrel oil forecast.

We could have a mixed morning with some Tech stocks moving up, some Financial stocks moving down a bit, and some oil stocks moving up. I will probably sell most of my puts today, and I will probably sell my DVN calls just ahead of the Oil Inventory report due out 60m after the open.

I speculate that we could have a tug of war today between various sectors that could lead to a narrower range day than we have seen the past two days. We shall see.....

7:25 am MT: The Naz futures have backed off quite a ways into an area that I thought they were more likely to open this morning about +9 to +10. I thought +20 earlier in the morning was too much for HPQ’s earnings. So the mixed morning looks like it will play out. I will be busy scaling out of positions.

7:35 am MT: I sold part of the DVN calls into the nice gap up this morning.

7:45 am MT: I took profits on LVS. I also sold some of every other put.

8:30 am MT: I am out of all the puts and the rest of the DVN calls. Here are the final tallies: PRU was a .50 cent profit or 14% gain. DVN was a 2.56 profit or 46% gain. DIA was a .17 cent profit or 5% gain. SPY was a $15.00 loss, so basically breakeven. HIG was a .50 cent profit or 9% gain. LVS was a .30 cent profit or 4.5% gain on the second trade. STI was a 2.25 profit, or 41% gain. And MS was a 1.59 profit or 59% gain.

On Monday I lost $486 on my (paper) trades. Tuesday and Wednesday I made $5,753 on my (paper) trades. So my three-day total for the week is a gain of $5,267. There haven’t been a lot of times this year to take bigger swings at sectors and stocks. And when I can take big bites, I still have to keep it to short swings. But Tuesday was about an A to A- type of day, which allowed me to go bigger and wider, and pick up some quick, solid money. Now the market is back to B to B+ type of trading, which means I'm nibbling and pecking.

1:00 pm MT: Today turned out exactly as I thought it would. I posted this morning pre-market that I thought we would get a tug of war with a narrower closing range, and that's exactly what happened. The market had a mixed, tighter day of back and forth price action. Selling the puts was exactly the correct thing to do. The downswings may resume (in fact they did a little for LVS and MS) tomorrow or Friday, but I can always hop back on that bus when it looks good.

Energy stocks and some Commodity stocks were the bullish sector movers today, along with Electronics and some Tech. On the bearish side of the market Leisure, Retail, Transports, and some Financials continued to look sloppy or fade. Oil is still dropping in its downtrending channel, so the bump up in Energy stocks is an interesting divergence from the actual price of oil.

Here are some interesting bullish movers on the day:

Tech/Electronics: STP, ENER, LDK, HPQ, RIMM, SPWR

Energy: DVN, XTO, CNQ, OXY, SWN, HES, NBL, EOG, SII

Chemicals: MON, TRA, AGU

Steel: AKS

Biotechs/Healthcare: MYGN, MDT

Here are some interesting bearish movers on the day, although the market will need to reacquire its downswing for me to get rolling with puts again:

Leisure: WYNN, LVS, HOT

Cyclicals: TXT

Financials: MS

Transports: UPS

1:50 pm MT: I nibbled on some STP calls just before the close. I ended up buying September because the 40’s had .10 - .20 cent spreads and everything else was too wide.

3:00 pm MT: Market Wrap: Oil is still in its downtrending channel, although it’s starting to make a little more noise. Traders refuse to close oil below $112.50, and oil stocks are beginning to take off a little as traders speculate on a possible short term bottom on the charts. The stock market pushed up a little today on the buying in Tech and Electronics stocks from various positive earnings in those sectors, and also buying in Energy and Commodity stocks. The bump up today wasn’t very strong, and it wasn’t very broad. So the market is sitting in a one-day mixed consolidation gyration. The Dow will need to clear 11,500 on the upside for me to go a little more bullish, and it will need to clear 11,300 on the downside for me to go a little more bearish. I’m speculating that we will see little mini-moves in sectors the next couple of days, and therefore smaller moves in the market as traders watch the price of oil. However, that could all change if oil breaks its downtrend channel, then oil prices will probably rally to the low $120’s, and the market will probably drop through short term support levels. Now if oil goes the other way and sloughs off, it may drop to $110, then the Dow and SPX may rally back up to the bottom of the Wedge, and perhaps even poke into the Wedge a little.

Note: you should start using the October Light Sweet Crude Futures now. Another tip: flip over to a line chart if you want to see past data that doesn't show up on a candlestick chart. I'm showing two visuals on oil for you. One is the candlestick chart to show you the downtrending channel and the clear short term horizontal and intermediate term diagonal resistances converging at $117.50. If oil goes above that resistance, it's probably headed up for several days to at least $120, and probably $122.50. The second chart is a line chart to show you how oil has NOT closed above the 10dma for over a month. So a move above the 10dma resistance, the short term horizontal resistance, and the intermediate term diagonal resistance will probably get the shorts screaming and the bulls punching for a sharp jab to $122.50. You can also clearly see the $110 support I keep yapping about as the low end of the $110 - $115 support zone I pegged. If oil drops below $112, then it's probably heading towards $110 pretty quick. A drop below $110 and we could see oil drop to the convergence of the horizontal and diagonal supports at $105. Got all that?.....Good!

Here is the candlestick chart of Near Month Oil Futures:
(click on image to enlarge)


Here is the line chart of Near Month Oil Futures:
(click on image to enlarge)

One last note: I am taking Thursday and Friday off. I will still be doing VC, and I will still get the post opened pre-market as usual. But the rest of the postings will be brief until the weekend.