S&P 500: Next stop 1370?
Many market indices and industry sector ETFs confirmed their ongoing uptrend last week, with the strongest pushing their way through nearby resistance to new recent highs. The weekly trend analysis reflects this mostly positive picture, although it’s not unanimous – the Russell 2000, iShares Emerging Markets Index, iShares Hong Kong Index, Consumer Staples Sector SPDR, Oil Services HLDRS, and Utilities Sector SPDR are currently showing mixed or negative trend spectrums.
The bottom line is that although the “market” and many individual stocks are becoming increasingly “overbought,” I’ll continue to view any sell-offs here as put-selling opportunities in an ongoing uptrend. Support and resistance levels that I’m watching on the S&P 500 include downside support at about 1310-1320 and 1275-1285, and upside resistance at 1370-1380.
New positions
Alcoa (AA) – Last Monday I sold some October 25 puts on AA after it dipped below 27, triggering my limit order:
AA is currently short-term “oversold” and appears to have long-term support at the 23-25 level.
Altria Group (MO) – Last Monday I sold some October 75 puts on MO after it dropped over five points on news of a federal judge’s ruling allowing a class action suit against the tobacco companies, and after the company announced that it would postpone its planned restructuring:
Whether or not this represents a short term bottom in MO (probably not since so many analysts are still positive on the stock 
), its 4.5% dividend yield and eventual planned spin-off of Kraft Foods are reasons I’d feel comfortable owning it if it’s put to me.
Pentair (PNR) – Last Tuesday I sold some October 25 puts on PNR as it fell to new 52-week lows after the company reduced its third- and fourth-quarter earnings guidance:
The stock is now short- and intermediate-term oversold and showing a positive divergence on the price oscillator I follow, as well as nearing long-term support at the 23-25 level. Fundamentally the stock appears to be a decent value here, and the company’s recently announced plans to double its share buyback is another positive.
Watchlist
New (and recently re-added) additions to the “upside strength” list include Allied Capital (ALD), Aegon (AEG), Bank of New York (BK), Dow Chemical (DOW), Honeywell (HON), Intel (INTC), PPG Industries (PPG), and US Bancorp (USB).
Recently re-added additions to the “oversold” list include Louisiana Pacific (LPX) and Nam Tai Electronics (NTE).
