12:15pm (EST)
The market opened higher as expected this morning and we have been watching the action to gauge how strong the bounce is. The bulls struggled to hold onto their gains 30 minutes into the session with the Dow and S&P briefly dipping into negative territory but got a second wind and have powered their way higher at halftime.
There was some better-than-expected economic news before the bell as Productivity came in at -0.3% versus a forecast for a decline of 1%. The uninspiring numbers dented futures but had little impact overall. Instead, the more important news will be the Fed rate decision at 2:15pm (EST), what Bernanke might/ or might not do or say, and other language about any change in the Fed policy.
As far as earnings, MGM hasn’t been immune to the sell-off and has dropped over 30% in the past few weeks. Following three straight losing Q’s, the company reported a profit of $3.45 billion, or $6.22 a share, versus a loss of $884 million, or 5 cents a share, in the year ago quarter.
The big surprise came on a one-time gain of $3.5 billion for the consolidation of its Macau business on its books. Without it, MGM would have lost 5 cents a share which was still better than the expected 13 cent a share loss that had been penciled-in by analysts.
Revenues came in at $1.8 billion versus expectations for $1.6 billion.
We like this stock a lot and after testing resistance at $15.75 several times in late July, shares have folded like a cheap lawn chair.
It’s tempting to buy shares at current levels and we are looking at LEAP options on MGM but we would like to see more stability in the market before making that call, pun intended.
As we head to press, the Dow is up 225 points to 11,035. The bulls and bears will be fighting over the 11,000 level going into the close and whichever side winds that battle should be favored for Wednesday’s open.
The S&P is popping 31 points and is 1,150. We mentioned 1,140 and 1,160 this morning as two areas to watch and the bulls have cleared one hurdle. Same deal here. A close below 1,150 favors the bears – above, the bulls.
The Nasdaq is showing the most strength and is higher by 82 points to 2,440. We have been mentioning the 2,400 as a key battle ground and that will be the number the two sides should be fighting over into the close.
Our current trades are holding up well following yesterday’s plunge and we have been protecting profits along the way. Like we said yesterday, this is our favorite type of environment so we will be busy getting in and out of positions. If you are a subscriber, check the Members Area to sign up for our Twitter updates which will notify you of when you have an email or the website is updated. This will be crucial going forward as we don’t want you to miss the hot action.
We will be back in the AM with our next update and it will be interesting what the market does after the Fed’s update. We also have some important trade updates. We are closing one trade for a quadruple percentage winner, up 1,167%; and another recommendation of ours is up over 200% so we have set a HARD STOP on the other half. Subscribers, check the Members Area for the updates.
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