The biggest thing we took away from yesterday’s action in the market was the S&P 500 holding the 1,100 level and the Dow holding 10,400. Trading was choppy but the market ended higher and the U.S. dollar also traded higher. A lot has been made of the correlation and lately when the dollar has been up, the market has traded lower. When the dollar has traded lower, the market has been up…don’t get too caught up this.
The Dow finished the session at 10,437, up 30 points while the S&P 500 added a point to close at 1,110. The Nasdaq closed at 2,203, up a half-dozen points.
All things considering, and it may too early to tell, but these levels that we have been talking about being RESISTANCE for the Dow (10,400), S&P 500 (1,100), and the Nasdaq (2,175) have now become SUPPORT. Again, it’s too early to tell because the bulls are running fast this week.
Now this is important.
Yesterday, we had this to say:
“It would be nice to see the S&P 500 hold 1,100 as we head into Friday’s option expiration. If the index can hold or move higher we could start to see some real pressure on the bears. This is a key level and could give the bulls some momentum if we can push higher.”
To break this down again, it means now the market is holding these levels and there a ton of people who may have to cover their positions. The November options will expire THIS Friday and the ones who have been “short” will now have to cover their bets. That means the bears will be buying the market instead of shorting it.
This could lead to a HUGE rally and our near-term targets remain Dow 10,850 and 1,200 for the S&P 500. The Nasdaq could run to 2,275 but some of the bigger names are looking tired. That is how we see things from this side of the pond.
One stock we are watching this morning is Vivus (VVUS, $8.57, up $0.72). We started noticing some HEAVY call option buying yesterday in both the November and December options chains. Vivus is in the race to bring an obesity drug to the market before a couple of other small biotech companies do.
Arena Pharmaceuticals (ARNA, $3.60, down $o.o8) and Orexigen Therapeutics (OREX, $7.61, down $0.01) are other players but Vivus was the one showing up on our option screen yesterday.
Vivus’ obesity drug, Qnexa, is in phase 3 trials, so some news could be coming out this week or next. The 52-week high for the stock is $12.88 and shares spent much of September in double-digits which is when the high was made. It may be a speculative play but it is one we are researching. Keep an eye on it…
Of course, we have more action going on in the Members Area then a Vegas craps table on payday. We have a number of trades in process right now and we have leaking out the good news all week. Netflix (NFLX, $60.75, up $1.29) continues to impress and has all the makings of a MONSTER trade. We are hoping the stock can match our Priceline.com (PCLN, $209.29, up $3.15) trade which returned our subscribers 468% in just 5 days…current subscribers, check for the updates…