Chris Tyler, Optionetics.com
March 18, 2011
A yen for intervention counters an unwanted uptick from Japan but market bulls are tiring or simply expiring intraday. As of 11:00 ET the SP-500 (SPY) is up 0.40% and “sell-e-brating” some profit-taking from out-the-gate celebrations.
On the heels of Thursday’s gap-based market bid from vastly oversold conditions which enjoyed the support of headway made by Tokyo Electric Power Co. at its Fukushima nuclear facility; the tide has turned once more in favor of fear. Overnight, Japan officials raised the country’s nuclear safety alert from level 4 to 5 as hopes of a power cord installation cooling core reactors loses its fusion with bulls.
Causing bulls to celebrate with their wallets out-the-gate, across-the-other pond, Khadafy’s regime issued a relief felt about-face to yesterday’s steadfast rejection of the United Nation’s “all necessary means” intervention in Libya. Vis-à-vis Foreign Minister Moussa Koussa, the Libyan government has ordered an immediate cease fire Friday and now insists its committed to accepting the terms put forth by the global peacekeeping organization.
Acting as secondary support, bulls tried to counter Japan’s nuclear setback by embracing news the G7 will intervene in the currency markets. Officials pledged to take action against the Japanese Yen after it continued to move to record highs against the US Dollar and a currency that’s become the reserve of choice for bears.
Another intervention of sorts, the umpteenth move by China’s central bank to keep inflation in check could be taken one of two ways by investors. Thus far, the latest unannounced round of monetary tightening which saw officials raise the reserve ratio requirement for member banks by 50bps hasn’t been rejected as an action which might stymie global growth.
In those intertwined markets of notice, share of the US Dollar (UUP) are off -0.25% and falling to fresh lows from an inverse cup-with-handle formation despite Friday’s backing from the G7. COMEX Gold (GLD) has managed to find some support amongst bulls with a relative strength gain of 1.05% aided by weakness in the Greenback and possibly hoarding in front of the weekend in a market still teeming with headline risks running the well-treaded gamut.
Trader’s global currency of choice, black gold (USO), is up 0.45% but contained within a less-volatile inside day against prior up-channel resistance as bulls and bears play in mostly indecisive conditions.
And the CBOE Volatility Index ($VIX) is breathing easier with its weekend assisted drop of -9.00% near 24%. While risks on multiple fronts still exist, bulls it appears, are once again more afraid to hold premium than not and risk getting burned from the possibility of a quiet weekend or one which winds up favoring optimism come Monday.
On the corporate front, shares of athletic goods goliath Nike (NKE) struck a hurdle at its 50SMA and has fallen -9.50% through 200SMA support following its top and bottom-line miss. By the numbers, the company reported profits of $1.08 per share compared to views of $1.12 and sales of $5.08B versus forecasts of $5.17B.
Boutique outfit FBR Capital lowered its price target on shares of NKE from $98 to $91 and reduced its FY12 outlook below Street estimates based on greater margin pressures. With shares now at $77.25 and well-removed from its March high double top of $91.12; it seems those bulls are running far behind the rest of the pack and today’s crowded footrace.
For the bulls, shares of JP Morgan (JPM) are up a bit more than 3.00% in a display of strong relative strength and technical leadership. The Dow component and global money center bank announced a 400% quarterly dividend increase from $0.05 per share to $0.25 and authorized a new multi-year stock repurchase program worth $15.0B with just more than one-half of that amount approved for 2011.
Technically speaking, Friday’s price action in shares of JPM sets up a confirmed weekly low for a slightly high handle. The tight and constructive pattern is five weeks in-the-making and follows a breakout attempt from a well-crafted, 28% deep cup-shaped base of eight months.
In those sometimes accurate heat-seeking option markets, traders’ efforts in JPM are favoring calls over puts by a two-to-one margin in above-average, but tied-to-expiration activity. One sort of bull gaining traction over his or her peers is the one collaring shares as the position’s shorted call drops in value while the protective put gains ground on a theoretical basis. The synthetic short risk reversal acts as a hedge for bulls holding long stock and wishing to collect on the higher dividend yield with a bit less mad money risk at stake or umm, "steak."
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
Optionetics.com ~ Your Options Education Site
