Market uptrend: Back on track
The breakout to new highs of most major market indices and a virtually all-positive trend picture confirm that the intermediate-term trend remains up. Not everything is painting a rosy picture here – sentiment indicators aren’t bullish and some negative divergences remain on longer-term price oscillators (although negative divergences on shorter-term oscillators have been negated) – but until price action dictates otherwise I’ll continue to view any sell-offs as put-selling opportunities.
The top of the recent trading range (for most indices) now represents key downside support: about 1540 for the S&P 500; 896 for the Russell 3000; 2640 and 2670 for the Nasdaq; and 13,700 for the DJIA. Only the Nasdaq index, which is not at new all-time highs, has definable overhead resistance – at about 2720 and 2775-2780.
New positions
Newmont Mining (NEM) – Last Wednesday I sold some July 40 puts on NEM as the stock dipped following its recent rally after the company announced that it had eliminated its gold hedges:
Although still in an intermediate-term downtrend, NEM is bouncing off of support at its long-term linear regression trendline and currently exhibiting some positive momentum divergences. It remains to be seen if this short-term uptrend is the beginning of a change in the intermediate-term trend, but for now it appears likely that the stock could continue to trade in the 39 – 44 range for a while.
OfficeMax (OMX) – Last Tuesday I sold some July 37.5 puts on OMX as the stock sold off along with the rest of the market:
OMX clearly remains in a short- and intermediate-term downtrend, and frankly looks like it ultimately has lower to go – perhaps to long-term support at the 35 level. Short term however it’s showing signs of positive divergences and could be due for a bounce here off of support at the 37 – 38 level. If I do end up being put the stock, I think there’s a reasonable probability that I’ll have an opportunity to sell calls against it at a favorable price.
Watchlists
There was no lack of interesting new stocks showing up on this week’s “upside strength” scans, including Bally Technologies (BYI), Benchmark Electronics (BHE), Cisco (CSCO), Companhia Vale do Rio Doce (RIO), Eaton Corp. (ETN), FedEx (FDX), Harris Corp. (HRS), Hecla Mining (HL), JAKKS Pacific (JAKK), Tellabs (TLAB), Paychex (PAYX), R. R. Donnelley & Sons (RRD), Xerox (XRX), and Yum Brands (YUM).
Again not much new of interest showing up on the “oversold” scans this week. Only JP Morgan (JPM) and Matsushita Electric Industrial Co. (MC) caught my eye.
