As discussed in my Market Forecast this weekend, we were expected the downward momentum to carry through to this week. Yesterday, the market broke down after testing and failing SPX 1340 in the morning. Techs led the declined, which was also discussed in the Sector Watch. Stocks continued their decline today and SPX went briefly below 1320, before buyers trickled in. We played the downside plays in the morning and switched gears to the longside and captured winning trades on both sides:
12:23 | HappyTrading IBM ($171.20) Sold to Close 05C170 May 170 calls, at $1.88 +71%
12:08 | HappyTrading IBM ($171.00) Sold to Close 05P170 May 170 calls, at $1.71 +55%
10:15 | HappyTrading PCP ($152.10) Sold to Close 05P155 May 155 puts, at $3.30 +74%
09:05 | HappyTrading PCP ($152.40) Sold to Close 05P155 May 155 puts, at $3.10 +63%
07:36 | HappyTrading SPY ($133.28) Sold to Close 05P135 May 135 puts, at $2.05 +21%
PCP, BA, ATI were all weak today. We picked up some PCP May 155 puts, and cashed out a +74% profit in a little more than 2 hours:
- 10:15 | HappyTrading PCP ($152.10) Sold to Close 05P155 May 155 put, at $3.30 +74%
- 09:05 | HappyTrading PCP ($152.40) Sold to Close 05P155 May 155 put, at $3.10 +63%
- 07:51 | HappyTrading PCP ($154.25) Bought to Open 05P155 May 155 put, at $1.90
When the market started to bounce, IBM was noticeably strong. Given that DELL was reporting after the market, we picked up some IBM May 170 calls and scored a +71% gain in less than a hour:
- 12:23 | HappyTrading IBM ($171.20) Sold to Close 05C170 May 170 calls, at $1.88 +71%
- 12:08 | HappyTrading IBM ($171.00) Sold to Close 05P170 May 170 calls, at $1.71 +55%
- 11:39 | HappyTrading IBM ($170.00) Bought to Open 05C170 May 170 calls, at $1.10
Some coal stocks started to bounce in the morning. WLT and ANR were the strongest, up +4% and +4.67%, respectively. However, farm and construction machineries, which are included in the KOL (coal ETF) broke down: DE -1.33%, CAT -3.78%, JOYG -2.46%; I would start to look for them to bounce as well.
Chinese internets have been dropping sharply for the past 2 weeks. They rebounded as well, after Tencent announced that it will take a 16% stake in eLong (NASDAQ:LONG). LONG shares popped +56.72% today! Investors rushed back into "the-now-a-bit-cheaper" Chinese internet favorites: BIDU +3.16%; SINA +6.27%; SOHU +4.09%; YOKU +6.54%.
After the market, DELL reported strong quarterly results that easily beat the estimates. DELL shares went up +5.6% after the report.
The Dow was down 68.79 points; SPX slid 0.49 point; Nasdaq added 0.9 point:
JJC (copper) saw a bit of a bounce, up +1.14%. XME (metals and mining) added +0.62%. SOXX (semiconductors) was down 1.2%. OIH (oil services) slipped 0.45%. XLF (financials) was up slightly. FXI (Chinese ADRs) was basically unchanged.
SPX slid 0.49 point to close at 1328.98. Its daily MAs were little changed, but, the MACD went lower.
Nasdaq added +0.9 point to close at 2783.21. Its MACD also went down.
VIX fell back below 18 today, as the markets bounced. The selling have been going on for 2 weeks now. A little breather is needed. We are seeing a bounce, but, it does not necessarily mean the near-term bottom is in. We'll have to see how strong this bounce is. DELL reported well after the market today and should provide some more impetus for the bulls, especially in the tech stocks, which sold off heavily on Monday. GOOG recovered everything that it lost yesterday; pretty impressive. AAPL finally saw some buying after nearly touching $330 this morning. AMZN lost $10 yesterday and is still on the weak side, finishing up +1.19%.
Good night and HappyTrading! ™