Market indicators mixed: “Caveat emptor”
While last week’s strong market rebound has managed to turn the weekly trend picture back to mostly positive, other factors – such as ongoing negative divergences on various price oscillators and still negative sentiment indicators – suggest that caution is warranted. A re-acceleration to the upside is certainly possible here and can’t be discounted, but the indicators are suggesting that a more likely scenario is for more corrective action of some sort – either here, after having tested the recent highs, or following a move to marginal new highs.
Last week’s up-move took out most upside resistance levels, leaving only the recent highs in most indices as the last remaining hurdles: about 1540 for the S&P 500; 896 for the Russell 3000; 2640 and 2680 for the Nasdaq; and 13,700 for the DJIA. Key near-term downside support levels are now about 1510-1515 for the S&P 500; 2620 and 2580-2590 for the Nasdaq; 880 and 885 for the Russell 3000; and about 13,450-13,500 for the DJIA.
Options Expiration Results
- GlaxoSmithKline (GSK) – The June 57.50-strike puts I sold against GSK on 5/21/07 expired in the money (ITM) and I was put the stock for a net cost basis of about $56.28 per share.
- MSC Industrial Direct Co. (MSM) – The June 50-strike calls I sold on 5/21/07 against my long position in MSM (purchased 5/21/07) expired ITM and my shares were called for a total 7-week net return from the position of about 6.3%.
- New York Community Bancorp (NYB) – The June 17.50-strike calls I sold on 5/24/07 against my long position in NYB (purchased 5/21/07) expired ITM and my shares were called for a total 7-week net return from the position of about 4.1%.
- Whole Foods Market (WFMI) – The June 40-strike calls I sold on 6/01/07 against my long position in WFMI (purchased 1/22/07) expired out of the money (OTM) for a 2-week net return of about 4%.
New positions
No new positions this week.
Watchlists
Plenty of interesting stocks showed up on my “upside strength” scans this past week, including AAR Corp. (AIR), Aluminum Corp. of China (ACH), Benchmark Electronics (BEH), Brooks Automation (BRKS), Freeport McMoran (FCX), Genzyme (GENZ), Illinois Tool Works (ITW), Intel (INTC), Kennametal (KMT), Molex (MOLX), Mueller Industries (MLI), Pier 1 Imports (PIR), Praxair (PX), Rockwell Automation (ROK), Tektronix (TEK), Texas Instruments (TXN), and United Parcel Service (UPS).
Not much new on the “oversold” scans this week (still a lot of utilities and REITs showing up), although Novellus Systems (NVLS) and sanofi-aventis (SNY) caught my eye.
