Elevated trade worries between China and the US finds bulls reconciling matters with light profit-taking. As of 11:10 ET the S&P500 (SPY) is off fractionally by 0.10% after a few sellers and buyers reach a new kind of optimistic trade agreement intraday.
A special guidance package from FedEx (FDX) and a likely tribute to the fallen on 9/11 helped bulls receive the market-based gift of six in a row to fresh intermediate highs in Friday's session and gains of nearly 3% for the abbreviated workweek.
In conjunction with the VIX getting a bit stretchy versus its 10-DMA and hitting larger supports of notice, a mostly overbought technical picture played a part in Monday's out-the-gate price schnitzel.
Aiding and abetting, Monday's most prolific financial headline is a nefarious-sounding one. Word has it the US is biting the hand that feeds it with the Obama administration imposing special tariffs on Chinese tires.
The move by US lawmakers has had the effect of applying the brakes on investor optimism as concerns of a potential trade dispute have not-too-surprisingly been elevated. For their part, officials from China have already retaliated by launching an anti-dumping investigation of US chicken product and vehicle imports.
In stock news and almost ironically enough, global grid / utilities provider AES (AES) is enjoying a "Good Mao'ing." Shares are up 5.00% to 14.85 to fresh year-to-date highs after word the Chinese government's investment arm is still interested in the free market system and considering a stake in the company according to Briefing.com.
Fueling some of Monday's first half reversal back towards the unchanged marker, coal stocks (KOL, ANR, ACI, MEE and PCX) are picking up technical steam with some of the group's leading names breaking out of loose weekly basing patterns. The closest news driver appears to be a small follow-up feature from Barron's this weekend on Consol Energy (CNX).
Shares of CNX have made an impressive 55% run since the news periodical featured the stock back in March with high praise. The latest piece continued to emphasize value in the stock, particularly in relation to its peers and according to one quoted analyst appear "so undervalued" if you believe we're "on the cusp of a recovery."
Intraday, shares of CNX are up 3.05 at 42.65. The move puts the stock roughly 1% above a "proper" cup-with-handle buy point of 42.17 that originally triggered on Friday in below-par volume before pulling in to close below the technical pivot.
In "heat-seeking" option action, more than a few traders are standing ready to see if the September 40 call in Best Buy (BBY) will follow suit. The intraday tally has a bit more than 4,000 trading on the session with shares up about 1.00%. Priced at $1.60 per contract relative the ATM is pricey with implieds nearing 90% or 4% stock risk with a shelf life of just four days left.
Best Buy's bid in its option premiums is tied to the consumer electronics giant's earnings report due out tomorrow morning. Analysts expect a profit drop of about 14% with profits of $0.42 per share. Technically, the price action in BBY has shares looking to confirm a pullback to its neckline with today's lows as part of an inverse Head & Shoulders pattern.
Chris Tyler
Senior Staff Writer & Options Strategist
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