Bulls continue to “act as needed” and maintain an uptrend on their own terms amidst varied catalysts. As of 10:55 ET the SP-500 (SPY) is up 0.55% and enjoying the fruits of its labor despite one absent apple of notice.
Day 2 of “Bearnanke Goes to Washington”, mixed-to-weak economic and corporate confessionals, a looming Beige Book likely chock full of anecdotal weak economic nuggets, cheap talk from state-sanctioned mouthpiece China Securities Journal and a less-than-sweet 0.15% bite out of the iShares Bull ETF (AAPL) nonetheless finds the SP-500 nearing its intermediate highs after a brief but more headline-aligned pressured start.
In earnings news and in our featured spotlight, echoed warnings last night of Intel (INTC), the world’s largest semi outfit cautioning on its FY12 sales forecast, have fallen on deaf ears or quickly become the victim of “better-than-feared” optimism. Shares of INTC are up 2.85% after an out-the-gate dip of about 1.0% following its two cent profit beat, narrow sales miss of 3.6% growth and issuing reduced fiscal year revenue outlook of 3% to 5% growth compared to prior expectations in the high single digits; but now on-par with Street views.
Fellow Dow constituent and Anchor Banker (XLF) BofA (BAC) isn’t acting as a drag on the market despite shares being under pressure by about 2.25%. The financial heavyweight has taken the opposite path of Intel after opening flat following its on-the-surface $0.05 profit beat and slightly worse-than-expected sales growth of 64.7%, but as part of a release filled with the group’s typical, complex and abundant ratio’s, exceptions, exemptions and the likes.
In passing and for the earnings watchdogs, shares of Stanley Black & Decker (SWK) are up 5.25% after getting hammered by roughly 30% over the past four months. Wynn Resorts (WYNN) is kind of coming up green for bulls with its 1.25% gain, but in a game which technically looks far from having a guaranteed outcome. And US Bank (USB), Yahoo (YHOO) and railroad operator CSX (CSX) have put together pleasant quiet rides for option hedge hogs selling premium ahead of those modestly-mixed announcements with shares of each near the unchanged level.
On the economic front, the Fed Chief is approachable once more as “Bullnanke.” Investors, so we’re told, sense central bankers are “ready, though not rushing” to inject more stimulus into the economy according to readily available, but after-the-fact, public sources at Market Watch. Behind the about-face from Tuesday’s Day 1 “Bearnanke” Senate Banking Committee address, vague dialogue which nonetheless reviewed options for the Fed to possibly deploy has apparently left bulls (and bears) in a buying mood.
And nearly off the radar this morning, housing starts for June beat forecasts of 743K with an actual increase of 760K while improving upon May’s figure of 711K. Slightly less impressive, but maybe extra ammo for stimulus watchers, building permits fell by 29K to 755K and below estimates of 765K.
In those intertwined markets of influence and outside of Apple’s slightly bitter red showing within its bullish cup-with-handle pattern, the energy sector (XLE, OIH) is showing relative strength gains of about 1.0% to 1.50%. Fresh relative highs in the US Oil Fund (USO) tied to stimulus hopes, look to be driving Wednesday’s circularly happy gains.
Somewhat ironically, despite the overall improved sentiment and beefy market pricing efforts, apparently that notice wasn't deliverd to bulls in hard asset plays such as silver (SLV) and gold (GLD). Both commodities remain under modest pressure within multi-week, low-level consolidation patterns.
Finally and in those sometimes accurate heat-seeking option markets, the VIX ($VIX) is off 2.0% near 16.15% after striking its first sub 16% reading since late April. Looking back at the SP-500 and the prior action aligns itself with a bearish lower high double top for the market. Similarly, a “stretch” or extreme differential of 15% or greater relative to the 10SMA in the VIX wasn’t met. In fact, a reading of about 11% and mostly matching our current situation, only suggested confident but not wholly complacent behavior. So, is this another "good enough for government work" or traders situation to act on as a bearish omen?
Personally, we’re less fearful than we were in April when we preached almost daily of a rather significant Fibonacci-based butterfly top. Though we always err on the side of caution and insist on a good defense, one decent difference in the VIX between the proverbial “then and now”, is the relationship of the VIX’s 10, 30 and 50SMAs.
Prior, the sentiment gauge was showing a bullishly-aligned (bearish for market) relationship pointing to rising implieds and tied at-the-hip, more fearful behavior. Currently, that moving average relationship is bearish in the VIX. In conjunction with a rather steady-looking uptrend in the SP-500 off its June bottom rather than a bearish top, now isn’t the time to be calling for an end to a sometimes bumpy trend, but one nonetheless pointed confidently, but not complacently up.
Chris Tyler
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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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.
