A disappointing report from RIM and weaker-than-expected durable goods put the "Monbacky!" on hold in Friday's first half. As of 10:45 ET the SP-500 (SPY) is off fractionally by 0.15% as bulls contemplate a double top amongst other technical nuggets of grave importance.
For many bulls it's a tech war of goliaths RIM (RIMM) versus Hewlett Packard (HPQ) with the former enjoying the slight upper hand in Friday's technical tug-o-war. The Blackberry manufacturer delivered a three cent profit beat and earnings growth of 14% in delivering $1.03 last night.
Unfortunately for bulls and headlining on Twitter, RIM's weak and below views sales guidance of $3.53B - $3.60B versus consensus estimates of $3.92B have taken a toll on shares to the "iTune" of 15.75% near $70.
Technically, the price swoon in RIMM puts shares in an extremely oversold position as it tests its two month lows and lower, well-spread Bollinger Band-after making good on some spied Fib-based patterns detailed yesterday.
On the option side, volume of nearly 300,000 is focused on RIM's calls by a margin of about 1.5-to-1.0. Most active with traders, the ATM October 70 put and October 75 and 80 calls are all sporting volume of 25,000 - 30,000.
Given the extreme move in RIMM and volatility crush of about 30% into the mid 40s, collar strategies by bulls wanting a limited risk position and willing to sacrifice some upside closer to levels expected to act as overhead resistance-appears to be a crowd pleaser.
Trying to keep bulls interests alive and well with fingers stroking the buy key, Dow component and computing giant Hewlett Packard (HPQ) reaffirmed its in-line i.e. bracketing EPS guidance of $4.20 - $4.30.
The "surprise" announcement as one might imagine, was likely prompted by management attempting to assuage investors that RIM's outlook isn't necessarily a barometer of the IT business and consumer spending climate. For their part, after an out-the-gate show of appreciation, bulls are having a slightly difficult time buying the message as shares get nipped by a mild 0.35% to 46.73.
On the economic front, investors have also been given some ammo for profit-taking from a weaker-than-expected report on durable goods. Analysts forecasts calling for a 0.4% increase were well off-the-mark with a reported decline of 2.4% for August and well-removed from July's 4.9 increase. That being said, "mulling" rather than donning additional "red chutes" after two days of broad-based selling, is par for Friday's market course.
In those other sometimes intertwined markets, treasuries as represented by the 20-Year (TLT) are bid and near one month consolidation highs. The action continues to suggest a rotation into safer havens is underway. Intraday, TLT is up 0.70 at 97.45.
Separately, Black Gold (USO) is fractionally higher at 34.15 after a two day 8% plus technical deal breaker. For bulls looking to further grease their market-based green shoots efforts, the price action in oil appears an ominous harbinger for Mr. Market's disconnect to the economic realities still facing Wall & Main.
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.
