Uptrend still OK, but fasten seat belts
The current trend picture for most stock markets and sectors remains almost completely positive, although Thursday’s market sell-off in the U.S may be a sign to expect more turbulence ahead. As usual, however, until the trend picture and other indicators suggest otherwise, the benefit of the doubt remains on the side of the bulls.
Key near-term support levels I’m watching are about 1480-1485 for the S&P 500, 2510 for the Nasdaq, 860 for the Russell 3000, and 13,100 for the DJIA. Key near-term upside resistance levels remain at about 1510-1520 for the S&P 500 and 2590-2610 for the Nasdaq.
New positions
Alcoa (AA) – Last Monday I sold some May 37.5 calls against my long position in AA (purchased 3/19/07) as the stock jumped on news of Alcoa’s hostile takeover bid for Alcan:
The stock has since pulled back a bit after coming within a hair’s breadth of 40 on Tuesday, but is clearly still in a strong intermediate-term uptrend. I may buy back the calls on further weakness if given the opportunity. Key support is at the 36-37 and 35 price levels. Key resistance appears to be at about 38-1/2 to 39-1/2.
GlaxoSmithKline (GSK) – On Wednesday I sold some June 57.5 puts on GSK as the stock continued to experience some short-term weakness after recently rallying to the 60 level:
GSK is still in an intermediate-term uptrend, but continued weakness and a drop back below the 55 to 55-1/2 level would change this view. Upside resistance remains at 58 to 58-1/2.
Watchlists
Interesting “upside strength” candidates this week include Alcoa (AA)*, Alltel (AT), China Telecom (CHA), Dillards (DDS), Halliburton (HAL), Lyondell Chemical (LYO), Pfizer (PFE), Post Properties (PPS), and Waste Management (WMI).
Stocks of interest showing up on this week’s “oversold” scans include Amgen (AMGN)*, Beazer Homes USA (BZH), Nam Tai Electronics (NTE), Pulte Homes (PHM), and Whole Foods Market (WFMI)*.
* I currently own and/or have an options position on this stock.
