Market trend now positive
Last week’s rally through critical resistance levels has shifted the market trend picture to positive. This is consistent with other indicators (such as the continuing high degree of bearish sentiment as well as the positive divergences on momentum indicators at the recent lows) and suggests that an intermediate-term uptrend may be underway.
While some consolidation is to be expected, this picture might change if the financials once again begin to under perform the rest of the market, and if the S&P 500 breaks below the ~1300-1310 level. On the upside, the S&P 500 might be expected to encounter resistance at the ~1380-1390, 1410-1420, and 1440 levels.
New positions
Alcoa (AA) – Last Thursday I sold some May 37.5 calls against my long position in AA (purchased 8/17/07) as the stock rallied along with strength in commodity prices:
AA’s intermediate-term trend is neutral to positive, but clearly positive on the short term, which may carry it into the 40s, especially if earnings (out this coming week) are good. Support remains at 36-37, while upside resistance is at 39-40, ~42 and 43-44.
Altria Group (MO) – Last Tuesday I sold some April 20-strike puts on MO as the stock sold off following a downgrade from a market analyst:
MO’s intermediate-term trend is unclear and is likely reflecting greater volatility and noise due to the recent spin-off of Philip Morris Intl. as investors and institutions reshuffle their holdings in the shares of the respective companies. Near-term support appears to be at about 20-20 1/2 and 19-19 1/2. The dividend yield at a share price of 20 is over 5.5%.
Whole Foods Market (WFMI) – Last Tuesday I sold some April 33-strike calls against my long position in WFMI (purchased 03/22/08) as the stock rallied with the rest of the market:
WFMI is in a short-term uptrend but still appears to be in an intermediate-term downtrend. Near-term support is now at the 30-31 level, which could easily be revisited. Near-term upside resistance remains at about 34-35, and above that at 37-38.
Watchlists
Stocks of interest showing up on this week’s “upside strength” scans include DuPont (DD), General Electric (GE), General Mills (GIS), Hasbro (HAS), Health Care REIT (HCN), Heinz (HNZ), Hormel (HRL), Mueller Industries (MLI), Rohm & Haas (ROH), Telefonos De Mexico (TMX), and Wal-Mart Stores (WMT).
“Oversold” candidates of interest this week include CBS Corp. (CBS), Reynolds American (RAI), Sunoco (SUN), Toyota Motor (TM), and Vodaphone (VOD).
