Market indicators now leaning negative
Last week’s market weakness is reflected in a now mostly negatively biased trend picture. This, combined with sentiment indicators that had been steadily worsening as the market moved higher, suggests that caution is now warranted.
Key near-term downside support is now at about 1490 for the S&P 500; 855 for the Russell 3000; 2680 and 2620 for the Nasdaq; and about 13,400 and 13,250 for the DJIA. Key near-term overhead resistance is now about 1510 and 1520-1525 for the S&P 500; 885 and 895 for the Russell 3000; 2775-2800 for the Nasdaq; and 13,700 and 13,900 for the DJIA.
Options Expiration Results
- Alcoa (AA) – The October 40-strike calls I sold against my long position in AA (purchased 8/17/07) on 9/26/07 expired out-of-the-money (OTM) for a 3-1/2-week net return of about 2.5% on the position.
New positions
Briggs & Stratton (BGG) – Last Monday I sold some November 22.5-strike puts on BGG as the stock dropped on market weakness:
The short- and intermediate-term trend is clearly down, but support might be expected in the 20-22 area.
MGIC Investment (MTG) – Last Tuesday I sold some November 25-strike puts on MTG as the stock dropped on market weakness:
The short- and intermediate-term trend is clearly down and previous support levels have been broken. Maybe the 20 level will offer some support.
Pfizer (PFE) – Last Monday I sold some November 25-strike puts on PFE as the stock dropped on market weakness:
The short-term trend for PFE had been improving in recent weeks, but the stock weakened with the rest of the market by the end of last week. Near-term support is at around 23 and 21.
Watchlists
New “upside strength” candidates of interest this week include Baker Hughes (BHI), Baxter International (BAX), British American Tobacco (BTI), Telefonica (TEF), and William Wrigley Jr. (WWY).
New beaten-down “oversold” candidates this week include Conagra (CAG), Eagle Materials (EXP), Fifth Third Bancorp (FITB), Harley Davidson (HOG), Hershey (HSY), Hillenbrand Industries (HB), MGIC Investment (MTG), Microchip Technology (MCHP), and Whirlpool Corp. (WHR).
