Markets mixed, but not negative (yet)
Most major market indices remain in a corrective mode, but have not yet tipped their hand as to whether this is just a short-term consolidation in the intermediate-term uptrend or the beginning of something more significant. The weekly trend picture reflects this, remaining mixed to negative, with only the Nasdaq and the Hong Kong Index currently showing positive trend spectrums.
Near-term downside support levels are about 1390 and 1375 for the S&P 500; about 12,000-12,100 for the DJIA; and about 2400, 2380, and 2350 for the Nasdaq.
New positions
Fifth Third Bancorp (FITB) – On Friday I sold some January 40 puts on FITB as the stock dipped after rallying recently to its 52-week highs:
FITB has been under-performing for some time, but has recently been showing some upside strength. Technically the stock is trading near the bottom of its long-term uptrend channel and isn’t far from long-term support at the 36-38 level.
Freeport McMoran (FCX) – Last Wednesday I sold some January 45 puts on FCX when the stock dropped by 10% on falling copper and gold prices:
Like many other commodity-based stocks, FCX is now becoming short-term oversold. Currently it’s bouncing off of support at the 50 price level, but a drop to around 45 – another significant support level – appears likely sooner or later.
Home Depot (HD) – On Friday I sold some January 40 puts on HD as it sold off with the rest of the market:
While HD is currently short-term overbought and due for a breather, it does appear to have higher to go over the intermediate or longer term. Over the shorter term, the 37-39 level should offer significant downside support. A break below ~36 would change my outlook.
Whole Foods Market (WFMI) – Last Wednesday I sold some January 45 puts on WFMI as it sank back to the 45 level, which it had last visited shortly after its huge sell-off last November:
It remains short- and intermediate-term oversold and is below its long-term linear regression uptrend line. Downside support levels appear to be at 43-44, ~40, and ~37. Long term I’m comfortable owning WFMI if it’s put to me.
Watchlists
New stocks of interest showing up in the “upside strength” scans include Deutsche Telecom (DT), Eastman Chemical (EMN), Hitachi (HIT), Linear Technology (LLTC), Lubrizol (LZ), Novartis (NVS), SuperValu (SVU), and Time Warner (TWX).
Lots of energy and commodity-related stocks are starting to show up on the “oversold” scans this week, but the only one I’m adding to the watchlist this week is Freeport McMoran (FCX).*
* I currently have an options position on this stock.
