Chris Tyler, Optionetics.com
January 5, 2011
Surprisingly strong ADP data finds bulls working on buying Wednesday’s minor market pullback. As of 11:15 ET the SP-500 (SPY) is up 0.05% in more of the same difficult to handle tickers but less “VIX’ing” behavior.
In economic news from across-both-ponds, mostly assuaging type data has been treated with mixed trader reaction. In Europe, the broad-based “FooTSiE” is up fractionally by 0.20% while Germany’s DAX is under slightly stiffer pressure of -0.80% despite a pair of improving and better-PMI results for the Eurozone and its most powerful economic constituent.
In Asia, markets finished fractionally mixed led by the Nikkei’s -0.20% and Shanghai Composite’s drop of -0.49% with in-line China PMI Service data in the catalyst spotlight.
The iShares FTSE/Xinhua China 25 Index (FXI) is faring a bit better with its flat performance and likely benefitting from the US market’s attempt at clawing its way back from would be profit-taking efforts.
Stateside, a hint of bears waking up from hibernation and reveling in the promise of a new calendar year proved a bit ambitious in pre-market trade. Early weakness of about -0.70% for the SP-500 was snapped up in ultra-fast bargain-hunting efforts following a much stronger than forecast private payroll gains from ADP.
The “loose but best we got” gauge preceding Friday’s closely-watched nonfarm payrolls report showed a record breaking increase of 297,000 jobs and handily beating estimates of 100,000.
Breaking down the jobs data, “goods producers” represented about 8% of those gains with an increase of 23,000 while the service sector, which benefitted from seasonal employment trends, saw the bulk of the hiring with its 270,000 jobs.
Tied at the hip and also providing some relief, the Challenger survey showed 32,000 planned layoffs in December. The figure marks the lowest monthly cuts in 2010, as well as showing a firm decline of -34% from November and -29% year-over-year.
And intraday, December’s ISM Services Index showed a slightly better-than-expected expansion to 57.1 from 55.0 and above estimates of 55.7.
In those often intertwined markets of notice, the US Dollar (UUP) is showing technical signs of strength with its bid of 1.10%. The price action has the currency proxy gapping above all short-term moving averages on Wednesday’s optimistic-looking economic provisions.
Despite a sigh of relief by off-the-mark analysts and attached signs of economic improvement, hard commodities denominated in dollars are under stiff pressure for a second straight session.
For its part, COMEX Gold (GLD) is currently bouncing from session lows but off -0.50% after gapping below its 50SMA after testing the key support line on five occasions since mid November.
Separately, the iShares Silver ETF (SLV) is faring a bit worse or better, depending on which technician you corner for questioning. Shares of SLV are down a stiff -1.85% but the more volatile and more dearly-held precious metal of late remains above its 50SMA—and making for less buggy conditions by some investing standards.
Also displaying bulls and bears caught working hard to price in today’s more optimistic economic prospects, treasuries as represented by the iShares 20-Yr (TLT) are off -1.85%. Prices though are still within TLT’s three to four week loose and flip-floppy congestion pattern which might represent bottoming near the 78% level or a bearish flag; depending on the day.
On the corporate side, Aggie outfit (MOO, POT, AGU, IPI) Mosaic (MOS) is helping the group grow some gains and put together a session of relative strength outperformance.
Shares of MOS are up 2.20% after reporting a $0.10 profit beat on earnings of $1.01 per share, besting revenues by about 9% on 56.4% year-over-year growth and management feeding bulls a decent serving of historic low inventory vs. demand factors for potash.
In other sector hot and not-so-hot spots of notice, the semis (SMH) are seeing some unusual technical divergence. For the bulls, current growth hotty ARM Holdings (ARMH) is adding 4.65% to fresh intermediate highs and best levels in a decade.
News this morning has ARM Holdings partnering up with NDS in pursuing the burgeoning internet TV market. Strength can also be found in NASDAQ 100 component NVIDIA (NVDA). Shares of NVDA are up 3.85% after receiving a somewhat opaque Tier 1 upgrade.
Separately, SanDisk (SNDK) is up a bit more than 3.0% on no news to speak of. The gain has shares attempting to breakout of two-week long “high handle” pattern formed around its June 2010 intermediate highs and make good on an adjusted net long call ratio [+4 Feb55C / -3 Feb60C] play discussed on Monday at Investors Business Daily’s Option Center and penned by this strategist.
Finally, for the bears and despite a lack of overt catalysts, shares of semi-equipment manufacturers KLA-Tencor (KLAC) and Lam Research (LRCX) are amongst large cap tech’s weakest with losses of -1.85% and -3.25% respectively.
Today’s bearish distribution is good enough for both names to be in the No. 1 and No. 2 spots for Percentage Decliners in the NASDAQ 100, as well as technically affording the bears a bone with each breaking 50SMA support.
In those sometimes accurate heat-seeking option markets, trader reaction to both KLAC and LRCX’s “chip in the ol’ technical armor” has gone largely unnoticed and / or unappreciated.
On mixed but mostly theoretically rich implieds, KLA-Tencor has seen some bearish-looking interest as roughly 500 of the ATM Jan 38 puts have traded versus open interest approaching 700 contracts.
Priced at $1.02 per contract with shares at 37.75, a bear looking for follow-through fallout below broken trend-line and 50SMA support will need a max loss of about 5% in shares over the next 15 calendar days to realize a double.
Chris Tyler
Senior Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
