In lieu of the Fed's more âbalanced stance' and a couple of other minor developments of interest to traders, Wall Street is showing some equilibrium in Thursday's early going. As of 10:32 ET, the NASDAQ Composite ($COMPQ) and S&P500 ($SPX) are off fractionally by -.21% to -.42% on a tiny bit of well deserved profit taking.
A couple of corporate disappointments certainly didn't improve the bulls standing coming into Thursday's session. However, coming on the heels of 2007's strongest performance to date and three days of buoyant 3.50% upside lift for the major averages, it doesn't help, that much is for certain. Headlining the finger pointing of why the proverbial "Buy, Buy, Buy!" might need to be tempered a notch or two, Motorola (MOT), KB Homes (KBH), rising Black Gold and maybe an overreaction by investors on a quest for the proverbial Holy Grail.
A few bulls received a nick of sorts from Motorola (MOT), the maker of the popular âRazr' wireless phone. After the closing bell the company warned that Q1 sales and earnings would miss Wall Street's views and by a rather wide margin. The lowered guidance consists of Motorola's first slip in sales in four years and one which will result in a profit loss for the coming quarter. The news hasn't been well-received by the analyst or trading community. Aside from a slug of downgrades and an eight-month low for the stock [down -1.10 at 17.64], the news represents for many, a very large question mark over large cap tech's growth prospects for 2007.
KB Homes (KBH) earnings release isn't helping any portfolio building either, depending on whom you ask. KBH is off fractionally at 47.60 and down 19 cents after posting better-than-expected numbers. However, with that benchmark being revised lower coming into the report and decent technical gains from sub $43 a few sessions back already built in, some nailing down of gains might be expected. More impressive, while the headline-driven 84% plunge in quarterly profits might be overlooked in favor of what lays ahead, with yet another homebuilder sending out the message of a tough 2007 shaping up, the action is impressive to say the least.
Elsewhere, the oil patch is seeing some buy side interest in a breakout of sorts, one day removed from the festivities in equity-land. The May futures contract is up 1.67 at 61.28 and through the always interesting $60-a-barrel "chatter barrier." Will the energy sector (XLE, OIH) provide technical leadership or will traders focus on the dwindling wallet? For now, it's the former as realistically today's slight equity-based schnitzeling is deserved in its own right. As for the commodity itself, the fuel behind today's Black Gold rally is apparently a delayed reaction related to Wednesday's larger-than-expected gasoline decline, as well as the weaker rate environment. With the Fed's more âbalanced agenda' traders are hoping and / or anticipating a stronger economic environment ahead and more demand for the black stuff.
GROWTH & MOVERS COVERAGE
Industry / Sector
RS / EPS 1YR%
Select reports scheduled after the market close and in the premarket:
Industry / Sector
Q-Estimates / Prior Yr.
.12 / .19
1.33 / 1.24
.35 / .37
.19 / na
Economic releases on tap:
Wall Street Forecast
Existing Home Sales
INDICES & MARKET MOOD
I didn't think a Fed-induced FTD was possible, which obviously very few did as well, based on the absolute power of the move. Surely a few shorts were involved, but all told, it is what it is, and for intermediate bulls the current environment deserves some directional respect after a period of sitting idly in cash.
Short-term, as written about in this morning's HOT SHOTS, the major market proxies are extended and do present some elevated risk for would-be bulls. However, that's mostly in similarly positioned equities which are out of position. With that being said, it can be pointed out that despite an elevated condition prone to schnitzeling, the broader markets are thus far holding up quite well. This is particularly true in the face of today's warnings, higher oil prices and a rate reaction, which irrespective, should never be treated as the only market necessity for bulls.
Looking over my own watchlists last evening, I was actually surprised by the amount of decent-looking charts. For me, those charts represent both the down and out reversal type, as well as up and comers (hopefully) still technically poised in consolidation phases within the right side of their bases. Of course, nobody except Cramer knows with any certainty that Wednesday's reaction is going to lead to an intermediate rally. However, I'm also willing to pursue the "Buy, Buy, Buy!" decision, just as long as there's an option to do so in a more meaningful way for the portfolio.
Index or Sector Proxy
S&P500 ETF (SPY)
Neutral / LT Bull
136.20 â 136.75
143.50, 144.75 â 146.50
NASDAQ 100 (QQQQ)
Neutral / LT Bull
41.75 â 42.25
44.50 â 45.50
Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler's Forum
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.