Market: Consolidating or topping?
Another mixed trend picture for the markets this week. It’s hard to say whether the current sideways/down price action of the major indices is simply a consolidation of the up move from the March lows or if it marks a more significant intermediate-term top of some sort.
A retest of the recent highs – i.e., about 1440 on the S&P 500 – would tend to argue in favor of the former. A break below the recent lows – i.e., about 1375 on the S&P 500 – would seem to tilt the odds toward the latter.
New positions
American Capital Strategies (ACAS) – Last Wednesday I sold some June 30-strike puts on ACAS as the stock dipped during some market weakness:
The current short- and intermediate-term trends for ACAS are unclear, but the recent retest of the lows below 30 and subsequent rebound suggest the possibility of a continuation of the rebound back into the mid 30s. A break below ~29 would change this picture.
Whole Foods Market (WFMI) – Last Tuesday I sold some January 2009 25-strike covered calls against my long position in WFMI (purchased 3/22/08):
WFMI remains in an intermediate-term downtrend and the recent sharp break below the 30 level – although causing the stock to become short-term oversold – suggests that the stock may be heading toward downside support at the 24-25 level. I sold some long-term in-the-money calls against my position to provide downside support if this occurs. If the stock goes straight up from here, I will just about break even on the position.
Watchlists
Stocks of interest showing up on this week’s “upside strength” scans include Abbott Laboratories (ABT), Cadbury PLC (CBY), Eaton Corp. (ETN), Hershey (HSY), Nippon Telegraph & Telephone (NTT), Packaging Corporation of America (PKG), and Waste Management (WMI).
“Oversold” candidates of interest this week include Colonial Properties Trust (CLP), Diageo (DEO), Magellan Midstream Partners (MMP), and TCF Financial (TCF).
