As the Dow and S&P head towards key round numbers, this week will likely deliver some interesting opportunities. The Dow is widely expected to breach the 10,000 level while the S&P possibly clears 1100. Retail sales and earnings may provide some volatility through the end of the trading week. Ultimately, a rally through those areas of resistance will probably give way to that elusive correction that some analysts have been looking for.
On the earnings front, a clearly positive jump in JPMorgan’s profits and optimism from Intel will likely light a fire under the market. Enthusiasm on the back of better-than-anticipated news has been the catalyst for strong rallies as of late. However, the retail sales number – coming in without the Cash for Clunkers boost – could still weigh on hopes of overall recovery. Despite being down less than the expected drop, sales still fell 1.5 percent in September.1 The US is now turning the corner on stimulus programs (and back to school needs), and is heading towards an important season for the retail sector so the details matter. A pullback will likely result – how deep and how long will probably depend on the rest of the earnings news.
A continued push higher will deliver an interesting situation for investors who were long last year when the Dow fell through 10,000 – they will have an opportunity when they reach their breakeven level. If the market sees a larger overhead supply or more willing sales beyond the 10,000 level, the stay up there might be short lived. This would give option writers a possible place to sell calls. This would play the potential that a market which has gained over 50 percent since March lows is nearing a point of exhaustion.
1 http://money.cnn.com/2009/10/14/news/economy/September_retail_sales/index.htm?postversion=2009101408
Past Performance is Not Indicative of Future Results.
Past Performance is Not Indicative of Future Results.
Disclaimer: Futures and options trading involve substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results.
