A bearish report out of Philly spells profit-taking or maybe smells of cheesesteak for Thursday’s bulls. As of 10:45 ET the SP-500 (SPY) is mostly flat after a topping of fresh highs in an otherwise tasty-looking uptrend still cooking nicely.
A bombardment of intraday weaker-than-expected economic data forced bulls to pull the plug on marginal fresh highs this morning with additional confirmation for monetary stimulus apparently on the backburner. By the numbers and cooking a few bulls off session highs of 1378 by roughly 0.50%, leading indicators fell by 0.3%, topping Street views calling for a dip of 0.2%.
Separately, existing home sales showing 4.37M units for June compared to forecasts estimating a roughly flat annualized rate of 4.65M versus May’s 4.62M level. And topping off the sprinkle of bearish stimulus, manufacturing data from July’s Philly Fed climbed from June’s -16.6 to -12.9 but fell short of estimates of -10.0.
In passing, premarket claims data which showed filings for weekly unemployment benefits shot higher to 386K versus estimates of 365K and well north of the prior period’s upwardly-adjusted 352K failed to stimulate bears or bulls, but looks like a fourth item to go along with Thursday’s menu of bearish delights.
On the corporate confessional side, large cap tech is maintaining an orderly appearance relative to the broader market. A slug of well-received better-than-expected, feared or simply "pleasing enough" results from the likes of Qualcomm (QCOM), Skyworks (SWKS), IBM (IBM) and eBay (EBAY) are acting as primary support.
In the spotlight, shares of eBay are up nearly 9% after the online auctioneering giant posted a modest penny beat on earnings of $0.55 per share, narrowly bested sales forecasts with growth of 23.1% and issued bearish-bracketing Q3 and FY12 EPS and revenue guidance.
Today’s technical reaction in EBAY has shares challenging longstanding resistance from an uptrend channel dating back to 2009. On the option side, the action has proven stronger-than-forecast based on an expected move of about 7.5% using front month implieds from Tuesday and detailed in this week’s Trader’s Radar on the Optionetics homepage.
For the bears and seeing the hardest technical bagging Thursday, grocer Safeway (SWY) is off 7.15% and taking out its 2003 and 2011 pivot lows to hit its lowest levels since 1996. The apparent smelly goods include a report which topped profit views by $0.02 on earnings of $0.50 per share, revenues of 1.8% that narrowly beat Street estimates, reaffirmed bullish-bracketing FY12 EPS outlook and management, to the layman at least, that sounded encouraging on paper.
In those intertwined markets of influence, a bid in black gold (USO) has helped craft support in the oil and gas sector (OIH), which in turn is assisting bulls defend their technical turf in the likes of the SP-500. Thursday’s drivers are tied to supply concerns as escalations in Syria and between Israel and Iran heat up, upbeat corporate reports and other “stimulating” thoughts to be sure.
The iShares Bull ETF (AAPL) is also acting in good faith today. Shares of AAPL are up 1.05% on day 8 of its handle consolidation within a corrective cup-shaped base of three months.
And the VIX ($VIX) is off by a modest 1.75%. At sub 16% the sentiment gauge is testing April’s pre market swoon levels, which could be of some concern for bulls. However, with short-term complacency readings still in check, proper MA alignment on the daily and the SP-500 painting a decidedly more bullish picture; the overall action remains conducive for higher prices.
Finally and in those sometimes accurate heat-seeking option markets, Russell 2000 constituent Pharmacyclics (PCYC) is atop the Unusual Activity list on a six-fold increase over its daily average of 3,200 contracts on volume of more than 22,000. Nearly 80% of the day’s option total in PCYC is in the name’s puts with roughly 80% of that volume tied up in several well out-of-the-money strikes going across multiple contract months all the way out into January in what appears to be speed or umm spread-driven activity. Technically, shares are testing the 30SMA for the first time in two months after a quick double in price.
Senior Options Writer, former Market Maker & fulltime Option Hedge Hog Advocate
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