After Friday's confirmation of a bull getting ahead of itself, bulls are taking some additional profits on light catalysts made to fit the mood of the day. As of 11:00 ET the SP-500 (SPY) is off 0.60% on some expired bull and less active incentive to chase the Jones' and other benchmarks.
"Dude, it's a SELL?" With a technical platform of ten straight higher highs, gains of 6.30%, a Bollinger gravestone doji confirmation and an ominous and typical prescient overbought RSI 14 in place; profit-taking for the SP-500 in Monday's first half should come as no real surprise.
Throw in a notoriously bearish calendar month and the hubris of cheerleading bulls stating money managers will continue to chase the Jones' amongst others into the end of the quarter [CNBC's Week Ahead] to look a bit smarter-and it might even seem more of a given. And if that truly isn't enough motivation, fresh headline catalysts along the lines of "Stocks Skid as Dollar Climbs" might be doing the trick.
On the corporate front a "Merger Monday" surprise from one-time growth champ and computing giant Dell (DELL) hasn't enjoyed the all-too-often resounding support from market bulls' intent on unearthing the next buyout candidate.
This morning Dell announced its definitive handshake of $3.9 B / 67% premium bid for Perot Systems (PER). The company expressed as being a "very fair and full price" on the Cheerleading Network Business Channel and expects the merger to be accretive by 2012. Intraday, shares of DELL are off 4.55% at 15.92 and breaking key 10-Day MA support of the past five weeks.
Another "sell the news" situation from a more recent go-go name is being spied in Biocryst Pharma (BCRX). The swine flu upstart was awarded a $77.20M contract modification by the US' HHS this morning for its influenza neuraminidase inhibitor. Nonetheless, shares are finding a bit of a bug type reaction from bulls as shares drop 5.60% to 9.45 and just below what had looked like a perfectly good 30% corrective doji low nestled above the 50-Day MA support line. "Doink."
Homebuilder Lennar (LEN) is being deconstructed by 5% of some of its recent relative strength green shoots building materials. The company is the lone corporate confessional this morning and reported a worse-than-expected loss of -$0.97 per share versus estimates of -$0.46 on a sales drop of nearly 35%. The disappointing results also trumped last year's losses. However, on conference call the company maintained an optimistic outlook which estimated a return to profitability in 2010 given continued economic stability.
In sector news, commodity-related plays (GLD, USO, XLB, MOO) so high on green shoots expectations of late are seeing, not-too-surprisingly, some relative laggardship as bulls take profits and / or rethink their outlook. Word of steel giant Arcelor Mittal's (MT) competition stating to the Financial Times they believe the company's outlook for the industry is too strong, isn't helping matters. Intraday, the steel ETF (SLX) is off 2.00%, while MT sheds 4.00% to 38.90.
For a second-straight session, the Gold Miners ETF (GDX) is spearheading technical weakness. Intraday and with shares losing their luster by 3.65% to 44.25, GDX has gapped below key daily chart support marked by prior cup highs set back in early June with its highs of 45.10.
Elsewhere and in those sometimes intertwined markets, there is some truth to Dollar strength prodding equity bulls into profit-taking. The listed US Dollar Index (UUP) is up 0.57% at 22.89 and registering its third-straight session of gains off year-to-date lows.
The Greenback's weakness in 2009 has been instrumental in aiding bulls green shoots buying spree of many dollar-denominated commodities, thus prompting a bit of extra consideration from investors regarding its potential technical reversal. Trader talk also points to meetings this week between the Administration and China, as well as UN and G-20 pow-wows as causing some unease amongst bulls.
On the option front, AIG (AIG) is seeing above-average levels of interest with the slight edge in the calls based on a put / call of 0.89. Intraday more than 140,000 contracts have traded versus a daily average of 205,000. Shares have broken out to the upside from a three-week long wedge / triangle pattern. Most active are the well out-of-money October 45, 50, 60 and 65 calls, all of which have traded in excess of 5,000 apiece.
While one might expect to see more overall dominant call side interest, still decent short interest of 18% and a implied skew suggests potential hard-to-borrow issues. That situation in turn typically promotes buyers of synthetic calls as traders are better able to manage their delta count and / or hedge without any future unpleasant surprises related to being "bought in."
Chris Tyler
Senior Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler's observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
