Chris Tyler, Optionetics.com
January 28, 2011
Bulls shift into profit-taking on geopolitical concerns after extended northward motoring reaches its final destination on fumes. As of 11:15 ET the SP-500 (SPY) is off -1.10% after reaching “Highway 1300” and making a technical detour south.
As opined in recent columns this past week, “Have you driven a bear lately?” Bulls in Friday’s first half are buckling up for just that sort of test drive following another dose of more mixed earnings unworthy of extending market prices after a twenty-one week long up cycle into key numerically-challenging resistance levels.
In the featured spotlight, shares of Ford (F) have crashed more than -13.00% and ripped through most all trendy price supports known to bullish passengers other than its 200SMA which sits a still sizable 15% below current levels.
Technical damage to the auto giant has been largely due to its surprisingly large profit miss of $0.18 on fourth quarter earnings of $0.30 per share compared to Street estimates of $0.48.
Ford did manage stronger-than-expected revenues for the period with sales slipping by -6.6% to $32.5B versus consensus views of 30.39 but failed to offer any hard guidance worthy of keeping bulls in the HOV lane heading north.
Shares of Naz’ 100 constituent and internet retailing giant Amazon (AMZN) have also delivered a less-than-terrific package for market bulls with the stock down -9.25% and breaking its up-channel support line.
On a pleasant but not strong enough note, Amazon beat by three cents on earnings of $0.91 per share. More importantly, slightly shy revenue growth of 36%, bracketing Q1 sales guidance and a well-below views profit forecast have been Friday’s chief points of contention for investors with shares having climbed about 81% from its July corrective lows to recent all-time-highs.
The talking heads “Dow 13,000!” has failed to hold on to that well-oiled ring of notice with more “same as it ever was” mixed results and disappointing reactions in constituents Chevron (CVX) and Microsoft (MSFT).
Shares of CVX are off -1.50% after producing a profit beat of $2.64 versus estimates of $2.41 per share, coming up light in the revenue department on sales of $54.0B compared to forecasts of $56.0B and the stock a member of the dime-a-dozen club as far as being prone to profit-taking.
For its part, Microsoft offered a bottom-line beat of $0.09 on profits of $0.77 per share and beat sales forecasts of $19.15B with actual revenues of $19.9B and year-over-year growth of 4.7%. On call, management sounded mostly optimistic but failed to give fresh guidance and did note the challenges that lay ahead for its Windows Phone 7. Intraday, MSFT is off -4.00% and testing 50SMA support.
On the economic front, a preliminary reading of Q4 GDP proved slightly disappointing. The economy grew by 3.2% and an improvement on the third quarter’s 2.6% pace. However, results still prone to a couple more rounds of tweaking did fall shy of estimates calling for an increase of 3.7%.
The Q4 chain deflator increased by 0.3% compared to forecasts of a 1.5% increase, while personal consumption grew 4.4% and up from the prior quarter’s 2.4% growth. Core PCE data showed an increase of 0.4% compared to the 0.5% quarter-over-quarter rise seen during the third quarter.
Separately, market bulls’ actual shift into reverse occurred intraday in the aftermath of stronger-than-expected consumer sentiment data for January. Economists coming to expect a slight increase from 72.7 to 73.2 for today’s final reading were pleased to learn of an increase to 74.2. For their part, bulls have proved to be less sympathetic, busy “selling the news” and turning around at the intersection of Highways 1300 and 12,000.
In those sometimes intertwined markets of influence, it’s all about growing unrest in Egypt and prices in supply sensitive commodities and safe haven vehicles, finding strong bids Friday. Intraday, shares of gold (GLD), silver (SLV) and black gold have found bulls rebounding strongly from Thursday’s nonsensical pressured move.
For its part, the US Oil fund (USO) is up 4.25% after yesterday’s described “baffling” attempt to by bears to break up-channel at Golden Cross and 38% support. In those sometimes accurate heat-seeking option markets, sympathy is quite apparent with a put / call of 0.18. Today’s reading marks it’s lowest in more than a year’s time with calls outpacing put volume by more than 5-to-1.
Most active, the Feb Weekly 38 call priced for $0.45 per contract with shares near 37 have traded more than 20,500 contracts and roughly nine times its open interest.
Slightly further out in the regular Feb contract, the 37, 38 and 39 calls have all seen substantial activity. Priced at $1.35, $0.86 and $0.52 per contract respectively, an upside move of roughly 7% to 8% in the USO underlying will be required by expiration in order for a simple long call position to realize a double in price.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
