9:05am (EST)

The market finally tested its April highs as the bulls pushed the major averages right into the top of our trading ranges we have been outlining all month.  After a tremendous September, most analysts have been calling for a pullback but the trend higher has been too strong to ignore despite October being a spooky month for the market.

Although things aren’t all that rosy on the economic front, the bulls have climbed a wall of worry that has powered the market higher for nearly two months now.  Yesterday’s session started off strong as the Dow was up triple-digits on a weaker dollar but a rebound in the greenback limited gains in the second half of trading.

The Dow finished Thursday with a gain of nearly 40 points, or 0.4%, and settled at 11,146 for its best close since early May.  The index traded to a high of 11,213 and just above our 11,200 target.  The next hurdle will be the April highs of 11,300 and a break above this level could lead to, dare we say, Dow 12,000 by year’s end.  Of course, we have to clear resistance first but the bulls like round numbers and a breakout could lead to blue-sky territory.  Sing it Allman Brothers.  Support remains in the 10,800 area.

The S&P 500 added 2 points to finish at 1,180 and above the 1,175 mark.  The index traded as high as 1,189 and came within a dozen points of breaking our top end target of 1,200.  Once cleared, we could see a possible run all the way up to 1,300 if the April high of 1,220 is cleared.  Major support will come in at 1,150 should the bears wakeup.

The Nasdaq also matched the S&P’s point total and closed 2,459 after trading up to 2,482.  We have outlined 2,500 as resistance and we have gone on record and said if it is cleared we could quickly see Nasdaq 2,600.

Futures are pointing towards a decent start after another round of positive earnings from last night and this morning.

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Baidu (BIDU, $102.48, up $2.47) posted better-than-expected results for the quarter and guided sales higher going forward.  China’s leading search engine company reported earnings of $156 million, or $0.45 a share, versus $76 million, or, $0.22 a share, in the year-ago quarter.  They beat the Street by 4 cents as analysts estimated the company would earn $0.41 a share.

Revenue surged over 75% to $337 million, beating predictions of $333 million as the company added 25% more online marketing customers.  Even more impressive is the fact that Baidu held a 73% share of China’s growing multibillion-dollar paid search market compared to 25% for Google (GOOG, $611.99, up $4.01).

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Last year, Baidu had a 60% share compared to Google’s 30%.  Google’s China missteps have been well chronicled by us in past articles and as you can see, Baidu’s growth is starting to pick up at Google’s expense and with China ending last year with nearly 400 million Internet users, up 30%, we could soon see an 80/20 split.

Google also announced a solid earnings report but a bad relationship with China limits their growth.  Their No. 2 ranking in China’s search market could be weakened further after the company cut the cord on 7 of the largest ad resellers in China that takes affect by the end of this month.

We got our subscribers into a Baidu call option trade last week and we closed half when the trade doubled on Monday.  This allowed us the opportunity to play Baidu’s earnings risk-free.  This took some of the pressure off of having an entire position exposed to an earnings report because predicting how a stock will react after the announcement is an art in itself.  However, because we left half of the position open, we should enjoy further gains after locking in triple-digits.          

In pre-market action, shares of Baidu are higher by $4+ to $107.

We have a lot more to talk about in our Members Area so let’s get to it.  As we head to press, Dow futures are higher by 28 points to 11,111 while the S&P 500 futures are up 5 points to 1,180.  The Nasdaq 100 futures are showing a 10 point pop to 2,090.

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