Options Trader: Monday Wrapup

by: Philip Davis

Well, that wasn’t so great, was it?

We declared the rally dead at 9:49 when I said:

GOAX failure already [Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), BKX) not a very pretty way to rally. Need the SOX but the transports are rockin’ so let’s keep our eyes on FedEx Corp. (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) and
YRC Worldwide Inc. (NASDAQ:YRCW) (you’re welcome, BTW) as the rails are going up no matter what happens on the Buffett news.

Bear-Bull Market Investors are divided over whether increased short interest is a bearish or bullish indicator for the market.

I must be learning something from Chartmaster Tom, as his EOD post says:

The market was under a GOAX rule #1 short signal most of the day with AAPL trying to pull its partners in the F/N zone but when it did so while forming a clear bear flag from 14:00 to 15:50, the odds were very high that it wouldn’t succeed - and this was resolved by a bear flag breakdown in the last 10 minutes, which made AAPL close very badly as can be seen on this TA.

We did get gains, but they were ugly, hard-fought gains that left our indices battered and bruised on the battlefield. The Nasdaq and the SOX took a hit and the Russell gave back a couple but nothing to be alarmed about just yet (unless Asia fails). The transports were denied by the 50 dma with a vengeance. None of this nonsense matters until earnings tomorrow anyway, so I’m going to skip the chart and think about a new set of levels for the morning.

US Markets

Oil took a "small" hit today, down $2.79 and flying right through my $62.50 target and looking like it’s very likely to test and fail the 50 dma at $60.50. Below that, and we are back to $57 in no time. All this was the result of just 23M barrels being sold off at the NYMEX today, so it is bound to be an interesting week.

U.S. Gasoline Stocks

Our gasoline stockpiles are almost below average, but we already have prices that are very above average and this mess is certainly caused by refinery utilization rates that are lower than they were post-Katrina. Unfortunately, the hurricanes taught the refiners that they could make much more money NOT making gasoline and other fuels than if they run full operations and they have been making as little as possible since late ‘05.

Gold got its own rejection at $680 as the dollar got a pulse with a gap back over 83, where it stayed frozen and lonely as interest rates crept higher.


We’ll see how the Asian markets go tonight, but Alcoa Inc. (NYSE:AA) kicks off earnings season at the market close tomorrow, so let’s rest up for that one - like I said this morning, the earnings are irrelevant; it’s the reaction to them that will tell us the true market mood.