EARLY TRADE

An outsized Merger Monday, global rally and maybe a third attempt at finding an intermediate follow-through for the market have the bulls on top in the first half of trade. As of 10:30 ET, the NASDAQ Composite ($COMPQ) and S&P500 ($SPX) are up .53% to .62% on lighter, but interesting levels of investor enthusiasm.

Investors woke up to a flurry of jolly good old deal making courtesy of Wall Street and beyond. With the added bonus of the global tail wagging Friday's stateside dog higher, the mood was and remains technically upbeat in Monday's first half. The buoyant buying spree is also being aided by Friday's ‘weekend worries' downside fuel. It turns out in this instance, those concerns were misguided as the prime suspects of mortgage industry woes and the Yen (FXY) carry trade have eased and remain out of the spotlight. Further, a rather quiet but powerful catalyst in the form of lower crude prices [-.03 @ 57.08] continues to offer underlying support for equities. And finally, a fourth leg for bulls to stand on in Monday's session is of the technical variety. While it looks like a lack of official volume confirmation will keep one set of bulls sidelined, others inspired by the likes of Wave counts may be seeing the possibilities.   

Call it merger mania instead of the typical Merger Monday headlines investors have come to expect. In the day's top story, across the pond a mega banking merger per the London Financial Times is in the works. English-based financial giant Barclays (BCS) is reported to be in talks with the Dutch banker ABN Amro (ABN) for a whopping $156 billion. The deal would represent Europe's largest ever banking merger. On the rumored possibilities, investors have catapulted ABN up nearly 10% to fresh-all-time highs and an intraday price of 39.68.

Elsewhere on the M & A front, at least eight sizable corporate marriages in a wide range of industry groups are in the works and putting a bid into the market. In fact of 142 of 147 S&P500 industry groups and all ten economic sectors are trading up in Monday's session. Headlining the official cause for celebration, the Private Equity group of CD&R is paying $4.8 billion or a 16% premium for conglomerate Servicemaster (SVM). Utilities giant TXU (TXU) is trading up on rumors the company will find other interested suitors [Blackstone & Carlyle] on top of leveraged buyout specialist KKR's existing takeover offer. Oil and gas services operator Hercules (HERO) is snapping up rival Todco (THE) for $2.4 billion. Engineering concern Quanta (PWR) is acquiring InfraSource Services (IFS) for $1.26 billion. And finally, hospital concern Triad (TRI) is the recipient of an artificial $5.5 billion buyout bid from Community Health Services (CYH). Shares of Triad are higher by 2.62 at 51.98.

GROWTH & MOVERS COVERAGE

EARNINGS CALENDAR

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INDICES & MARKET MOOD

Personally, I'm very interested as to how Investors.com will describe today's activity, should prices continue to firm. The reason being, Monday marks the first official day of the follow-through day [FTD] window and while ‘price is nice', volume is lacking. However, that statistic was artificially induced due to the mechanics of the Quadruple Witching on Friday. And all told, today's volume isn't too shabby and could still end up being above average. Could a new "rare" rule be in the works? Probably not, if I were take a wild guess. But they have changed some of the rules related to the FTD over the years and in this trader's humble opinion, this might be deserved of a fresh mandate.

On the other hand, Elliott Wave is triggering today with an EBOT signal. At the same time, last week's extremes in sentiment and combined double bottom formations do support the directional long decision overall. However, much like the FTD rule when confirmed, the observation is that neither trigger represents a green light for initiating fresh longs across the universe of stocks. Selectivity is still the key. And on that point, classic intermediate-style breakouts are still not the best bet in town.

Chris Tyler
Staff Writer & Options Strategist
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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.

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