Today we’re excited to announce a change to the charts that are used within the new OptionsHouse platform. We are replacing our old charts with new charts that carry some exciting new functionality.
There are two new features that come with these new charts:
- Charts refresh automatically, meaning you’ll see the latest data as it unfolds.
- More visual options via a drop down—you can choose to show a chart in four different modes: (more…)
As one step of the trading process, some traders will take a meticulous deep dive into chart patterns (and accompanying technical indicators) before opening any new positions. Others dismiss all technical analysis as irrelevant or even nonexistent. What makes one intangible “line” (a moving average, for example) any more important than another?
Regardless of your opinion on moving averages, RSI, MACD, oscillators, or other technically-based indicators, it’s never a bad idea to look at a price chart or two when planning your next trade. Price charts can offer a helpful frame of reference for your stock or option trading. (more…)
Let’s flash back to May 2006, when gold prices were behaving in a similar fashion as today. The yellow precious metal saw almost a 40% rally over the course of a couple weeks.
The SPDR Gold Trust (NYSE: GLD) – an ETF that trades at about one-tenth the price of gold and actually holds gold in a trust – saw its share price surge from $52 to almost $72 in a matter of two months. Many called this a “parabolic move” at the time.
A parabolic move essentially means that the price of a security (or a commodity) makes a sharp, fast rise, usually out of a basing pattern and thus becomes overextended, usually within shorter durations (two weeks or less). Often, when a security makes a parabolic move, the amount that it rallies is beyond its “typical” behavior. (more…)
Watching yesterday’s market action, I realized that we are indeed in a bearish trend. I noted this a week or so ago in my article referencing technical indicators that were recently violated to the downside.
As the S&P 500 Index (SPX) continues back toward its July lows, which are just above the 1,000 mark (1,010.91, to be exact), many technical analysts – including me – are concerned about a continuation back to that level. There currently doesn’t seem to be much technical support from the current SPX price down to the July low.
Ever since the dreaded “death cross” that occurred in July, I have been monitoring the price action of the SPX (partially to check the validity of the cross). After the cross occurred, which you can see in the chart below, the index actually rallied.
The 200-day simple moving average (in yellow) crossed above the 50-day simple moving average (green) early on. The exponential 200-day (red), crossed the 50-day later in the month. Regardless of which trendline you prefer, the index will view these cross points as levels of potential resistance.
The Federal Reserve partially confirmed Tuesday what we already knew (with respect to the state of our economy) and failed to change interest rates. Ben Bernanke et. al. did, however, state their intentions to begin using the proceeds from maturing mortgage bonds acquired during the crisis to keep its holdings of domestic securities around $2 trillion.
While this certainly isn’t true easing of monetary policy, but rather prevention of tightening, the act seemed to be interpreted as not enough action on the FOMC’s part to bolster our ailing economy. Are economists ever happy?
Wednesday’s worse-than-expected trade balance number coupled with a slowdown in Chinese factory production sent the markets sharply lower, violating some key short-term technical levels, mainly in the S&P 500 Index. What I also found interesting was a Wall Street Journal/NBC news poll revealing that almost two-thirds of Americans still believe the economy is on a downward slope and has not bottomed out yet. These new results are much higher than the 53% of Americans who felt that way in January. The poll also showed an extremely high distain for our friends in Washington.
A couple of weeks into this quarter’s round of reports and the overall results seem positive so far. At least that seems to be how the market has interpreted them. At the end of the day, when it comes to investing, it’s all about a stock’s relative value (for most of us, anyway). Earnings results can make or break a stock’s price trajectory, accelerating a current trend or reversing it.
Since June 12, which was the start of this earnings season, the S&P 500 has risen from 1070 to its current level of about 1105. While the broad index has managed to get above its 20- and 50- day simple moving averages (SMA), it still has yet to clear and hold above the 200-day SMA, which is currently 1,114.3.
This is in addition to resistance the index may encounter up around the 1,130 level, which was the high back on the 21 of June. The reality of all of this is that we are currently trading just above most of June’s levels, but far below the highs of around 1220 visited in April. While the majority of stocks seem to be meeting or beating estimates, there are a few areas where growth is just not there or a company is guiding lower.
Top line or actual gross sales/revenue seems to be the focus of many market participants. After all, a company can only cut costs so much. Without a real increase in revenue, there may not be much of a reason for companies to hire new employees, which is another looming specter for the markets. By the way, non-farm payrolls will be released next Friday ahead of the opening bell.
One of my favorite things to do is observe and sometimes laugh as market pundits (and sometimes that includes me) attempt to explain the reasons why the market does what it does. I woke up Thursday morning to S&P futures again moving higher by seven points and 10-year note yields above 3%. Lo and behold, the same folks who were calling for near-Armageddon last week now seem to think all is good in the world. The headlines read, “Unemployment Claims Drop More Than Expected … Market Looking Strong.” But is it … really?
The S&P was up 31 points Wednesday and is up roughly 60 points from its recent low of 1010 just a couple of days ago. When the the S&P was trading at those lows, the index was below the two standard deviation daily Bollinger band, an oscillator that many analysts and traders use to pinpoint overbought or oversold conditions, (in this situation, the reading was obviously indicative of an oversold condition).
Supposedly, the big catalyst yesterday morning was that first-time unemployment claims for benefits dropped 21,000 in the past week to 454,000, when analysts were expecting a more narrow pullback to roughly 458,000. First off, the weekly numbers tend to be extremely volatile and generally don’t tend to get a ton of attention because of their unpredictable nature and their high tendency for revisions. Aside from all that, this number is not great and is just a tad below what analysts were expecting; it certainly doesn’t strike me as earth shattering.
The S&P 500 Index has been chugging along to the upside since hitting its most recent low of 1,042 on June 8. At the time, that low was exactly at the lower two-standard-deviation Bollinger band, possibly indicative of an oversold condition. As of Tuesday’s close, we were trading in the middle of these bands.
Since the June 8 low, the broad market ETFs such as the SPY and the DIA have been moving higher on lower and lower volume, which could mean a lack of conviction on the part of market participants. That weakness is maybe beginning to rear its ugly head in the past two days’ price action.
When the SPX began moving lower back on April 26, the price of the index shifted lower during the last 30 minutes of the trading day, accelerating the moves south from early in the day and confirming direction. From June 8 until Monday, the prominent market action was to move higher in the last 30 minutes of the day, leading the market to a net gain in that period. But that trend may be changing yet again and the reluctance of traders to hold positions overnight could be one cause of this.
I remember as a market maker and specialist, one of the main ways (and really the only one way) I had for analyzing short-term market direction was to “read the tape” and watch order flow. In other words, I would look at price action and make determinations as to whether to be long or short delta (direction) at different moments during the day and overnight. While this is not foolproof, it really makes sense when you think about it in the most basic of terms. (more…)
Thursday morning, an analyst with MKM Partners lifted his rating on eBay (NASDAQ: EBAY) to “neutral” from “sell.” (Neutral is essentially a “hold” rating). MKM maintains a 12-month price target of $20. The analyst noted that while his firm still has concerns about EBAY’s drooping market share in the e-commerce segment, they are “hard-pressed to identify a near-term negative catalyst that might drive the shares below our … fair value estimate.” In other words, EBAY may not move higher, but it might not move lower either, at least according to MKM Partners.
Looking at an EBAY chart, it’s clear that the stock has been relatively range-bound for several months. Since September 2009, the stock has made minimal movement below 21 or above 25, despite historically high volatility in the broader market and the tech sector.
There isn’t much a stock trader can act on when it comes to a “hold” or “neutral” rating. After all, it seems counterintuitive to buy a stock that isn’t going up or sell a stock that isn’t going lower. That could be where option strategies come in. Two hypothetical option strategies on eBay – one neutral, one bearish – are outlined below. Remember these are merely examples, not recommendations. Consider your own risk/reward parameters and personal trading goals before executing any new trades. (more…)
The short-term fate of S&P 500 (and the rest of the market, for that matter) face some relatively high expectations for non-farm payroll jobs tomorrow. The consensus among analysts is for the addition of more than 500,000 jobs, but I am seeing indications actually closer to 520,000. As I stated yesterday, this would be the largest monthly addition of jobs in the 10 years of data that I have reviewed. The estimates have actually gone up since earlier in the week.
In yesterday’s blog, I noted the lack-luster BLS metropolitan employment and unemployment report that was released earlier this week. In addition to that report, ADP said Wednesday that 55,000 private sector jobs were added in May, about 50% of what analysts were expecting.
Several sources have pointed out that about 150,000 jobs will be coming from the 2010 census hiring, which, of course, is temporary. So in reality, if you back out the 150,000, you’re left with more than 350,000 “real” jobs added. From a statistical standpoint, the chances do not look good with both the BLS and ADP reports showing shortfalls. (more…)
